Ignazio Visco: Sustainable development and climate risks - the role of central banks

Speech by Mr Ignazio Visco, Governor of the Bank of Italy, at the 18th International Conference for Credit Risk Evaluation "Assessing and Managing Climate Change Risk: Opportunities for Financial Institutions", Venice, 26 September 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

First of all, let me thank the conference organizers for setting up this important event and for their kind invitation. Today's remarks are partly based on a speech that I gave in May at the Italian Alliance for Sustainable Development (ASVIS).

I would like to start by noting that the issue of the compatibility between natural resources and the development goals of nations has been studied since at least the end of the 18th century, with the works of Thomas Malthus on food supply and population growth. It has then re-emerged a number of times in the public debate.

The less young among us may recall, for example, the simulations produced for the project of the Club of Rome on the "Predicament of Mankind" - The Limits to Growth - in the early 1970s. These simulations came in the wake of a worldwide demographic explosion and set off a global alarm signalling the risks to the survival of our ecosystems and of the human race itself. At that time, it was observed that the depletion of natural resources resulting from the simulations, largely based on the extrapolation of the trend under way, did not take sufficient account of two important mechanisms that regulate the functioning of the economy: the rebalancing power of prices and the endogenous nature of technological change. When the resources used in production become scarcer, an increase in prices discourages demand; at the same time, higher prices provide an incentive to search for new production methods that utilize fewer of those resources.