Andrew Bailey: Tackling climate for real - progress and next steps

Speech by Mr Andrew Bailey, Governor of the Bank of England, at the BIS-BDF-IMF-NGFS Green Swan 2021 Global Virtual Conference, 3 June 2021

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

It is a pleasure to be participating today, at such a unique event.

Over recent decades, our global economic system has faced multiple shocks or swan events, ranging from the Covid-19 pandemic to the global financial crisis of 2007/08. But if we turn our eye to the future, we can see another swan lurking in the reeds, and it's green. That green swan is why we are here today, the threat posed to our economies and our financial system by climate change.

Central banks, regulators and policymakers came together in the aftermath of the financial crisis to reform the system so that it could better weather future shocks. Like before, we must come together again to address the threat of climate change. But unlike before, we cannot wait until the aftermath to do so.

On Tuesday I spoke about the role central banks have to play on climate change and that, far from representing an entirely new objective, the Bank of England's work in this space sits firmly within the bounds of our mission to maintain monetary and financial stability. We have an important role to play, but it is governments, businesses, investors, and individuals that have the most difficult and impactful decisions to make in driving the transition to a net-zero economy.

Today I want to build on those remarks to reflect on central banks' climate-related work to date and to consider how it will need to evolve if we are going to continue to meet our remit. I will address this by talking about three main areas of our work: firstly, improving the understanding of climate-related financial risks across the financial system and macroeconomy; secondly, developing and embedding climate risk management in the financial firms that we regulate; and finally, seeking to achieve best practice through our operations as a central bank.

I will begin with our work to understand climate risks across the broader financial system and the macroeconomy.