If banks proactively manage climate-related risks, they will not be blindsided by stranded assets, meaning that capital will be preserved and can be used to finance investments in the low-carbon transformation. By compelling banks to adequately assess and manage climate-related risks, we are, in effect, safeguarding the financing of the transition to a low-carbon economy as well. There is a knock-on effect of doing so, however, but it is a welcome one. Regarding the risks emanating from climate change, our sole aim is to live up to our mandate. Climate change creates material risks for banks, so it is our job to ensure that the banks under our supervision address these risks adequately and proactively. But what is the supervisor’s role in this process? The ECB aims to ensure the safety and soundness of the banks we supervise. To put this number into perspective: we are talking somewhere around 8% percent of global GDP each year.Įurope’s financial system is largely bank-based, so banks are playing a pivotal role in greening the economy. Investment will need to be considerably higher than this USD 6.9 trillion figure if we are to live up to our commitment under the Paris Agreement of limiting the increase in global temperatures to 1.5 degrees. And that is just to keep us on track to limit global warming to 2 degrees Celsius above pre-industrial levels. The OECD estimates that global investments of USD 6.9 trillion every year are required until 2030. And it is also true for the transformation necessary to avoid these dire consequences. This is certainly true for the consequences if climate change continues unabated, such as increased natural disasters and the loss of habitats and biodiversity. The challenge of climate change is daunting. But today I will focus on how they will be taken into account by ECB Banking Supervision. As many of you know, climate change considerations feature prominently in the ECB’s ongoing monetary policy strategy review. It offers great inspiration to all of us in European institutions who are just as adamant about doing the same. Your commitment to meeting the goals set under the Paris Agreement is outstanding. And I am very happy to delve into the topic of climate change at an event co-organised by the European Bank for Reconstruction and Development (EBRD) – an institution whose own work remarkably exemplifies what international cooperation can achieve in supporting the greening of the economy. It is a great honour for me to be with you today to discuss the role of banks in greening the economy. Keynote speech by Frank Elderson, Vice-Chair of the Supervisory Board and Member of the Executive Board of the ECB, at the conference on “The Role of Banks in Greening Our Economies” organised by the European Bank for Reconstruction and Development and Hrvatska narodna banka
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