Sarah Breeden: Driving different decisions today - putting climate scenarios into action

Speech by Ms Sarah Breeden, Executive Director for Financial Stability Strategy and Risk of the Bank of England, at the MIT Golub Center for Finance and Policy 8th Annual Conference, 20 October 2021.

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

We are now only 11 days away from COP26 in Glasgow.

Climate science tells us that the planet has already warmed by about 1.1 degree Celsius since pre-industrial times. Indeed, the news is full of the devastating effects of physical changes already taking place around us. And existing commitments from countries to reduce greenhouse gas emissions are not enough to keep warming to well below 2 degrees, let alone 1.5. The United Nations Intergovernmental Panel on Climate Change (IPCC) estimates we will reach 1.5 degrees by 2040 even under their 'very low emissions' scenario. Failure to formulate more ambitious commitments and deliver against them this decade will mean we miss the last opportunity significantly to deter the course of climate change.

The case for action is clear – the question is whether our actions will match that case, in particular whether we turn aspiration into action on the scale required. Delivering a path to net zero requires all of us to take necessary steps – governments and business, investors and individuals, as well as central banks and financial regulators. Here at the Bank of England, we have taken a range of actions in line with our objectives – including setting expectations for banks and insurance companies on their approaches to managing climate-related financial risks, running a system wide climate scenario exercise, and setting out how to green our corporate bond purchase scheme – to play our part in the transition to a net zero economy.