Frank Elderson: Making finance fit for Paris - achieving "negative splits"

Keynote speech by Mr Frank Elderson, Member of the Executive Board of the European Central Bank and Vice-Chair of the Supervisory Board of the European Central Bank, at the conference "The decade of sustainable finance: half-time evaluation", organised by S&D and QED, Brussels, 14 November 2023.

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

Just over a month ago, Kenyan athlete Kelvin Kiptum completed the Chicago marathon in a stunning two hours and thirty-five seconds – a new official world record. Halfway through the course, however, it wasn't at all clear that Kiptum was on track to set this record. He was lagging behind the previous record set by his compatriot Eliud Kipchoge in Berlin in 2022. But by completing the second half of his marathon almost a full minute faster than the first half – achieving what is known in running as a negative split – he managed to break the world record by 34 seconds and get closer to the elusive two-hour mark than anyone had done previously in an official race.

As a number, "two" seems to have a particular appeal in many fields beyond marathon running. At the ECB, for example, we consider that price stability is best maintained by aiming for 2% inflation over the medium term. Meanwhile, climate scientists consider two degrees Celsius above pre-industrial levels as the global heating threshold beyond which extreme weather events and the degradation of ecosystems would be disastrous for humankind. In the Paris Agreement, global leaders committed to staying well below those two degrees of global heating. And it is the figure the High-Level Expert Group on Sustainable Finance – which I took part in – had in mind when drawing up its recommendations on sustainable finance in 2018.

This conference marks the halfway point in what was envisaged to be a decade for sustainable finance, building on the high-level group's recommendations. And at this half-time juncture, I am sorry to say that it is not at all certain that humankind will remain below that disastrous threshold of two degrees of global heating. But Kelvin Kiptum's recent world record provides hope. It shows that, by pushing for a negative split, great achievements are possible. In other words, we can deliver on our commitments to limit global heating in line with the Paris Agreement, provided that solid foundations have already been laid in the first half of the decade and on the – admittedly extremely challenging – condition that we run at a world record-breaking pace in the second half.