 Welcome. It's my real pleasure to welcome you to this session of the immense Grass v Festival of Research on Sustainable Finance. This year it's been a fantastic set of presentations and insights we've had so far. Today we'll be looking at the issues of central banks and how they can connect the work they're doing in terms of responding to the COVID crisis with the actions around climate and climate risk. My name is Nick Robbins. I'm a professor in practice at the London School of Economics and I'm a co-author with Simon Decal and Uli Volts of a toolbox of sustainable crisis response measures. This was produced by the LSE where Simon and I are based and also the SOAS Centre for Sustainable Finance which Uli Volts leads. This was produced through the Inspire program which is the International Network for Sustainable Finance Policy Insights Research and Exchange. I'm delighted to be the co-chair of that initiative. We're really pleased that Inspire is one of the two research stakeholders of the network for greening the financial system. The network that involves now over 60 central banks and financial supervisors and the other research stakeholder is of course Grass v itself. For today we have a great panel in front of you. I will be moderating the session. We'll kick off with a presentation of the toolbox, the key findings. First Uli Volts will kick off followed by Simon and then delighted to have two really insightful respondents there. First we'll have Chris Fate who is Head of Division and Head of the Bank of England's Climate Hub. Thank you very much for coming to us today. Chris is very much looking forward to your comments. After Chris has given his feedback and insights we will have Adele Morris who is the Joseph Peckman Senior Fellow and an Economic Studies Policy Director looking at climate change and energy at the Brookings Institute in Washington DC. Adele is leading an Inspire project on the Federal Reserve and climate risk but probably now very importantly is also one of the contributors to the recent Commodity Futures and Trading Commission reports on climate risk which I believe came out yesterday and is really hot off the press so I'm sure we'll get some really up to the moment insights on the contents of that and then the implications for regulation. So in terms of the formal process then obviously there will be opportunities for Q&A. Please do use the Q&A function and I'll try to pose those to the panelists. Either name them to individuals or as a general question. There's also a chat function and obviously use that for sharing documents that you would like to share with other participants. And so I think with that I'm going to now turn over to the content of the session. Uli, first Simon do you want to sort of get the screens up and running and then Uli do you want to kick off in terms of going through the toolbox and pulling out the rationale and the key findings. Thank you. Thank you Nick and great pleasure to be here in this discussion with everyone. So let me briefly introduce Toolbox. Central banks have been playing a crucial role during this crisis initially in stabilizing financial markets when they were close to implosion in March. They've been also keeping the economy afloat and central banks and supervisors also will have to play a crucial role in the recovery phase once we get there. And it's important to highlight that even though the responses right now are very much geared towards the short term, the actions taken now in many cases will have very profound implications also on long term outcomes. And so even though dominating discussions arguably central banks really and supervisors need to consider how their actions are affecting sustainability outcomes, including climate change. In the toolbox we put forward four reasons why central banks and supervisors should be concerned with climate change and other sustainability challenges at this time. So first of all central banks themselves may be exposed to material climate rated risks. The NGFS has put forward an impressive amount of work highlighting the materiality of climate related financial risks and so if central banks are for example conducting asset purchase programs, they would also should also account for climate risk in their own operations. I'll get back to that in a moment. Secondly, central banks and supervisors clearly have a role to play in minimizing risk for individual financial institutions and the financial system at large. And as I'll explain in a moment, there are current actions can actually lead to a build up of climate and sustainability risks if not properly taken into account. And then lastly, central banks and supervisors as public bodies arguably have an important role to play in facilitating sustainable investment in line with the Paris Agreement as well as the United Nations sustainable development goals. Can move on to the next slide please. So the slide is not moving for some reason or another, but here it is. So we argue that there is a risk that at the moment we see a lot of liquidity enhancing stimulus measures that are not aligned with sustainability objectives. And this could contribute to a significant build up of risk in financial portfolios. And so be a risk to financial stability of individual institutions, but also of the financial system at large. Importantly, it can also kind of these liquidity enhancing measures can contribute to a lock in of climate risk that will hamper the just transition that we desperately need. And lastly, central banks and supervisors have been easing various counter cyclical and prudential instruments and that this is absolutely the right thing to do in a crisis like this. But there is a risk that if these are eased in a non sustainable risk sensitive way, they may enhance certain risks. We would argue that it's absolutely crucial that central banks and supervisors push on with the sustainability agenda so that climate risks and other sustainability risks are addressed head on, even during this crisis and that the agenda that the NGFS has put forward is not being delayed, but rather that central banks and supervisors really re emphasize the need for moving ahead with his agenda. And if you could move on to the next slide please. The good news is that there are quite a lot of monetary and prudential instruments that can be calibrated in a way that accounts for climate or other sustainability related financial risks, or that will contribute to a scaling up of sustainable finance. And I'll just mention a few points which I think are very relevant but Simon will in a moment move on to present the larger toolbox. So the first instrument that central banks in particular should be taking a look at is collateral frameworks. These can be amended to account for climate and other sustainability related risks and these are very powerful tools and help to reduce the exposure of the financial sector to certain types of risks. When conducting asset purchase programs and a lot of central banks even now in emerging economies are doing that. These asset purchases should also take account of climate risk in line with the Paris and sustainability goals. And this does not mean that we're calling for green quantitative easing which most central bankers are very much not inclined to do, but it's about not purchasing certain non sustainable assets. So it's not kind of green QE, it's kind of non dirty QE. Thirdly, when adjusting prudential measures during kind of to enhance liquidity and so on, these transition risks and physical risk of climate change need to be taken into account. And last but not least, central banks should also take responsible investment principles into account when managing their own portfolios. And central banks can really and supervisors can send kind of strong signals to the institutions they supervise that they really have to take these risks into account. And that doesn't mean that they have to implement all kinds of regulated burdens right now, but they can send strong signals that risks need to be taken on board and I hand over to Simon. Yes. So I will I will quickly run you through through the toolbox itself. So, so the toolbox is is informed by global experience and we are very aware that there's no one size fits all approach and our toolbox therefore reflects different financial cultures, policy spaces and objectives of central banks and supervisors. Well around the world. Yes, they are they are two important aspects here. So first instruments that are seen as standard by some central banks may not be used, may not be conventionally used elsewhere. And then secondly central banks and supervisors across different jurisdictions operate of course within very different mandates and legal frameworks. So the toolbox itself has three overall areas, monetary policy, prudential policy and other, and then we have nine policy subcategories. And for each of the different instruments, we point out how a conventional sustainability blind calibration looks like and how these instruments could be employed with a sustainability enhanced calibration. So the first category that we see here is monetary policy. Here we have for for instruments, collateral frameworks, indirect monetary policy instruments such as open market operations of reserve requirements, direct monetary policy instruments, some of which can of course be used to affect the allocation of credit and and and non standard instruments of course including as a purchase programs and helicopter money. So for most of these instruments, there are specific proposals for for how they could be aligned with with sustainability goals, but for others for example for collateral frameworks. These are still being worked out at the moment. The second category is prudential policy. Here we have micro prudential instruments including stress testing disclosure and other bars are three instruments. And yes so so with regard to a to a sustainability enhanced calibration climate risk related stress tests mandatory is G disclosure and client for example a climate risk sensitive calibration of of differential risk based capital requirements would be would be options here. We also have micro micro prudential instruments. Here we differentiate between cyclical instruments and and cross sectional cross sectional instruments. The third category includes other policies. First of all, further financing schemes and other initiatives, for example corporate financing facilities or loan guarantees and and well also financial sector bailouts. I argue that these could be made conditional on the reduction of CO2 emissions or the focus on on sustainability enhanced activities. Then as only mentioned there there's the management of central bank portfolios where where the disclosure of climate related financial risks could be an important first step. And finally there are there are there's the support for sustainable finance activities, which should be rolled out and not be delayed despite the current crisis. So to to contextualize this this toolbox and to and also to test our classification empirically. We looked at all currently used crisis response measures by by central banks and and supervisors around the world. And this investigation was based on the IMF's policy response to COVID-19 tracker. So we looked we looked at policies at the policies of around 200 central banks and monetary unions. And an interesting finding at that most, if not all of these instruments that we propose in our toolbox are currently used, however in a non sustainability enhancing way. And yes, more specifically with regard to the different instruments, we find that on monetary policy, a lot of central banks have moved very quickly to extend their collateral frameworks and to include a broader variety and quality of assets. And on supervision, what we see across the board is that that many central banks and supervisors have East counter cyclical capital buffers and general micro prudential regulation and well and supervisory standards. So yes, with a few exceptions, we have not been able to identify any monetary or prudential crisis response instrument that that instruments that have been calibrated in order to to enhance sustainability. However, there are some positive examples and exceptions where authorities are advancing their sustainability agenda. Despite of COVID-19 ongoing efforts in China, for example, or the efforts by the by the NGFS, the NGFS has published a lot of reports over the last months on stress testing and monetary policy. So there are considerable efforts there and on and quite a few central banks have also launched sustainable finance initiatives, for example, Mexico, the Philippines, and two days ago also the Brazilian central bank. Okay, so conclusions and ways forward there. There are two interesting initial conclusions that that we have. First, many changes have not been fully implemented yet and the dynamic nature therefore provides considerable scope for central banks and supervisors to retrofit some sustainability factors into their crisis response measures. And then secondly, well, this policy response also demonstrates that a broad set of instruments is actually available to central banks. And we would argue that to some degree, this renders the ongoing debate redundant regarding the availability of a number of these unconventional measures because, well, because some of them have now been used by central banks and in the past it has been argued that these could not be used. It's also interesting that quite a few of these of these unconventional instruments have now been used and have been calibrated to to support specific sectors. In most cases, the SME sector or the tourism sector. Yes, to conclude, we think that this bears the question of whether this creates now some policy space and an opportunity to green central banking and to and to scale up green finance and to further include climate risks in in binding regulation. Yes, thank you. And back to Nick. And Simon, thanks so much for that. I think what has been very interesting in this process of putting the toolbox together has been both the sort of cataloging of the the policy instruments and then the empirical work to look actually across the range of interventions that central banks have done during the crisis in one of the things we've been very, very conscious of is the very clear signaling that central banks individual central banks alliances such as this has been giving about the importance of a green and sustainable recovery as we move out of this this crisis so I think we've seen actually some really interesting examples of a sort of increasing commitment. I've sent in the chat the link to the toolbox itself, obviously, if you want to look at now or later on and maybe they'll give you some more thoughts about the questions you might want to ask the panelists when we come to that the first really good to pass on to a central bank to Chris faint. As I said who leads the Bank of England's climate hub obviously the Bank of England really want one of the central banks of the vanguard of these efforts, and Chris really interested to hear your views on the toolbox obviously, and and also how you in the Bank of England have been navigating the issue of climate change and climate risk in these these very tough months we've had and where it might go in the future so so Chris I'm going to hand over to you. Thank you. Thank you Nick for the invite to speak today and I wanted to start by congratulating you and the team on getting the Inspire report out so quickly during the crisis no mean feat, giving all the challenges that it represented. And this is really important work to be done not only as a check for central banks but also as a way of looking at actions together in a holistic way because I think so often actions are just looked at on a on a piece more basis. This of course, right at the top of the banks agenda as Andrew Bailey set out in June, the bank is fully supportive of a green recovery from the pandemic, as it is critical to ensuring an orderly transition to net zero is achieved by 2050. And this is central to our objectives as it reduces the risks faced by by the UK financial system and the economy in a way that will become more and more important over time just to just to bring that a little bit to life. A recent study in nature found that the green recovery measures could reduce future warming by 0.3 degrees and investments in the green recovery could also help support the labor market during the recovery process. For example, the IA sustainable recovery report found that green recovery measures could save or create 9 million jobs globally over the next three years. But let me quickly to set out what I see is the bank's role in the green recovery. The exact size and shape of the green recovery packages, particularly on the fiscal side is a matter for government to determine in the first part. And we've started to see some measures come through, for example, in their scheme for home improvement grants. However, a green recovery is not possible without the financial sector and financial sector firms can scan up their own efforts to support the transition. And in doing so, what they can do is maximize the impact of green recovery packages. Similarly, by improving their own management of climate related financial risks, they can have a cascading effect to their clients in the real economy, helping them transition as well. So in this way, building back better and a green recovery needs to have the private sector, as well as governments and as well as central banks, given the scale of the climate challenge that we face. And that's where the bank comes in. The bank can play its part here by ensuring that the financial sector is in a position to do this effectively. And this has been a major area of focus for us for some time. So, for example, we've issued a security statement to all of our regulated firms, setting out how they should address climate risks. We are working internationally to advance understanding of climate risks through the NGFS, for example. We are also working to advance climate disclosures both internationally and domestically, and this is really key to getting an understanding of climate risks embedded in the market. And we'll be undertaking a climate stress test next year on the UK system. And I think this in particular is important because it will force large banks and insurers to have more detailed conversations with their key clients about what transition plans they have in place, speaking directly to the green transition. But there's also, of course, the actions that the bank has taken as a direct response to the crisis. We've announced a number of schemes to provide liquidity into firms and the economy. And this immediate response to the pandemic has taken a number of different forms. If I just summarise some of them, we've released capital requirements on firms to allow them to lend into the economy at a time that is most needed. And picking up my previous point from before, our expectation is that firms will increasingly take into account climate considerations when they are doing this lending. And in fact, we've just said to firms that our expectation is that they would have fully embedded that by the end of 2021. The bank also took deliberately broad-based measures at some scale and speed to provide, to protect livelihoods and stabilise the economy and the financial system. So this included the launching of the short-term CCFF funding, extra quantitative easing and rate cuts. Not only were these actions essential, it should also be noted that the stability that it contributed has helped form the foundation upon which a green recovery can be built in the next phase of the economic response to the pandemic. Where structural considerations like climate change can and should play a bigger role. But as flagged by the ASPY report, it is absolutely right that the bank as well as other central banks should be looking at the actions that it's taking and considering whether they should be iterated in the future to reflect climate considerations further. And there's a number of actions that we are taking in this regard. Firstly, as noted by Andrew Bailey earlier this year, we are looking at our asset purchase scheme and we'll explore with HMT under whose mandate we operate, ways that climate risks could be further incorporated. We are also interrogating our own climate exposions as you cannot determine where change is needed if you do not understand the current position. So in line with this, we have just published our first ever TCFD report on the bank's climate exposures. And I think this is the first time such a broad TCFD report has been published for a central bank. And we're continuing our work domestically and internationally and with the COP unit to build up broader capabilities in markets to help understand climate risks. For example, this is the development of portfolio warming metrics. And I think this brings me quite neatly to the Inspire toolbox. As I mentioned before, this toolbox is particularly useful as it brings together a large number of potential measures in one place under its four priority areas for central banks to focus on. Beyond the observation that this looks like a pretty comprehensive list. I certainly couldn't think of anything that wasn't on it. I had two key takeaways. The first is that all of the ingredients in the toolkit are really important considerations that I would argue actually transcend the COVID crisis. By this, what I mean is that many of the actions set out represent those that should be taken by central banks through the economic cycle rather than just at the point of crisis. And for that reason, I think you'll see that many of the actions listed being undertaken by central banks prior to the crisis were being undertaken by central banks prior to the crisis rather than at the point of crisis. But that said, of course, central banks come in many different forms and some have engaged with climate to different degrees. So the advancement of the toolkit will differ by region and I doubt if any central bank is doing everything on the list, I know that the Bank of England is not at the moment. I can therefore see huge value in evolving these toolkits in a way that allows them to be used as a reference point for central banks at all times. My second observation is on momentum of actions. It's just an unfortunate reality that during times of stress, capabilities of institutions get squeezed as they have to focus on the crisis in hand. And this can have an impact on the investment in areas such as climate. But as we know, climate change is not going away. We cannot afford to delay our actions. So with this in mind, the bank has sought to strike the right balance here between being pragmatic and focusing our efforts on getting the most bang for our buck from our resources. And in our case, one of the things that we've been focusing on is continuing to work with the private sector to advance climate analysis. So the key changes that I would observe is that with our climate stress test, we did have to push it back a little bit just because the stress test relied upon financial firms having discussions with the real economy firms. And we just thought the timing of the crisis would not lead to the most productive discussions. So we said, look, we'll just push it back to and maintain the scope. However, at this same time, we have put firms on notice that this time should be used to embed climate risks throughout their businesses. And we have heavily invested in areas such as scenario development, both through the NGFS and domestically. So whilst the Inspire Report focuses on the actions that central banks have taken in response to a crisis, I believe that it can also be used to consider where existing actions have been delayed or curtailed as a response, which is really important as we go through this period. Now, I've been speaking for a while, so I'll stop there, but let me just finish by reiterating how important it is that we all work together to secure the green recovery. We all have a role to play in this, and it is essential that we continue to challenge ourselves on whether we are taking all of the actions that we can. Reports such as that compiled by Inspire are a hugely valuable tool that can help us to do this. Thank you very much. Chris, that was really, really good. And I think it was really good from the burning deck, as it were, of how to manage climate risk and take things forward and ensure that the financial system is not taking a sign off the board. Really, really interesting. I've got lots of questions I'm sure other partisans have. Adele, going across the water to DC, great to have you looking forward to your comments on the toolbox and indeed some of the real highlights and maybe some of the sort of inside the Beltway comments on the CFTC report, which you had a hand in. So over to you, Adele. Thank you. Thanks very much, Nick. And I wanted to thank all the previous speakers for their insightful remarks. I'll try to add of the United States in this discussion. So what Nick was just alluding to is a new report. It just came out yesterday. The entity that's issuing this report is us. Okay, so we have a complex set, a system of financial market regulation. So one of those agencies, independent agencies called the Commodity Futures Trading Commission. And there's an advisory committee to that CFTC agency called the Market Risk Advisory Committee. And they made a climate related market risk advisory committee subcommittee. So this report is coming out from an advisory group to the CFTC. Now, this is an important distinction. So this report is authored by a collection of folks from banks and industry and academics, such as myself, I was on this committee and other experts. And we wrote this report ourselves. It's not a product of government employees. It's a product of this advisory committee. But I think what what's exciting about it. First of all, is that they even created this subcommittee in the first place. And the second exciting thing is this list of recommendations that might actually look kind of familiar to those who've read the toolbox and some of the other recommendations of the TCFD and the network for greening the financial system. So let me tell you a little bit about what the report concluded. First of all, and number one, okay, and I'm going to read it because I think the text is really important. This is our first recommendation. The United States should establish a price on carbon. It must be fair, economy wide and effective in reducing emissions consistent with the Paris Agreement. This is the single most important step to manage climate risk and drive the appropriate allocation of capital. Okay, so what this is saying is the best way, the first most important way to manage the risk of climate change is to do something about it and make sure that market forces, the profit motive, all decisions within the economy are informed by price signals that include charges for carbon pollution and other greenhouse gases as appropriate. So until you've done that, you know, you can have the best Federal Reserve policy to the stars, but you haven't addressed the underlying systemic risk of unaddressed climate change. Okay, so then some of the other recommendations are going to sound really familiar. First of all, the recommendation is for the United States to join the NGFS. And, you know, we, we've had parts of our government go to these meetings, but we need to be a full-throated member of the NGFS. And that's the conclusion of our subcommittee. And, you know, and it's not just the Fed to be clear. It's all these other agencies. So we've got, as I mentioned, the CFTC. We've got the Securities and Exchange Commission, Comptroller of the Currency, and other parts of the Treasury departments. And, you know, there's, there's about a dozen of these things. And you can see who they are if you look at our Financial Stability Oversight Council, and there are a bunch of different agencies involved in that. And so one of the key things we need to do is coordinate our climate-related risk policies across these different agencies. We don't need, you know, it's not helpful to have piecemeal consideration when some of the same issues are going to come up for different agencies. We're also calling for a vigorous research agenda from the research arms. And I think our technical experts could be quite helpful in the international conversations within the TCFD and the NGFS. And I think we're going to have to develop stress testing scenarios and procedures. All the things that you guys have been talking about, both in the toolbox and elsewhere, we're going to have to start thinking about. With regard to the pandemic and asset purchases and that sort of thing, I don't think we're going to be organized enough during this, you know, crisis to, you know, really engage on climate with regard to the current crisis. I mean, it just hasn't been part of the methodologies of the workstream of the research within these organizations. That doesn't mean we shouldn't be thinking about how our pandemic response relates to climate change or what the climate considerations are. It's just, I don't think our, we're not as far along as other countries in incorporating climate related factors into the responsibilities of these agencies. And, you know, I think there are a number of things that are going to be important, not just in a crisis situation, but just as Chris said, and I think Chris nailed the lot of the important points for central banks is, you know, what's going to be pertinent inside or outside a crisis. And that includes, for the United States, it's going to include things like disclosure. For example, right now, companies have to report material risks, but there's really no guidance on climate related risks within that. What's material, what's the timeframe over which these risks need to be considered. In fact, there's some discussion about how maybe, like, I'll give you an example, our department of labor recently issued a proposed rule, suggesting that maybe pension fund managers should not consider ESG factors in their choice of portfolios. With the proviso that they might not be, you know, actual financial considerations. And that's the kind of thing I think we just got to get past all that and, and, you know, try to catch up with you guys across the pond. I want to say though there might be some things that don't translate particularly well to the United States. And I'm just going to give you my opinion. And, you know, you can take it for what it's worth, but I think there are certain sensitivities within our government that are going to be hard for any independent agency to overcome. I mean, one of them in particular is the fact that half of our legislature is opposed to any considerations of climate. And so how, how is the Fed going to take on climate in a way that doesn't provoke opposition from our Congress. So, so right now in some instances like the CFTC, there's five commissioners and, and they have staggered five year terms and only three up to three can be from the same political party that actually gives some balance to the CFTC. Leadership and that's partly why they were able to commission this subcommittee report when other oversight agencies may not have been able to do that. With the Fed, I think if we start, you know, dividing assets into clean and dirty or green and not green. I think it's, it's, it's asking the Fed to ask for trouble politically, because for every dirty industry, there's a legislator who comes from that district who's going to take offense at their constituents being referred to as dirty. And then I can imagine, you know, the Fed chair being hauled up to testify at Congress and, you know, and face questions about why did you call my constituent dirty. Like this is not a battle the Fed really is going to win and it's not going to be one that serves the planet. So I'm, I tend to be a little bit more reserved about that kind of classification and maybe some other people. Now I know we got a great team of people here on this panel, so I'm going to close there. But I look forward to the questions and happy to discuss anything further. So it's very open views and I think giving the insights from the CFTC report, which I think actually is a real example of the value on sort of robust evidence based analysis from regulators within their mandate and acting in the interests of financial stability. So really, really, really good example. We have a number of questions, which we're going to ask to the panelists and Simon come back on as well for it. We have everyone. So Chris, if I can pose one straight to you is actually to what extent within your team at the climate hub, do you have as well as the sort of the classic sort of prudential and sort of financial stability and maybe monetary skills? Do you have people actually with insights from climate science and natural sciences as well in terms of the interdisciplinary mix? So just kick off that one. Yeah, we do the way that the way that the office. Now, can you hear me or you can even feedback? Yeah. Let's try this. So the way that the way that the bank operates is that it's got a climate hub and then it's got spokes across the bank and there are a number of experts at different degrees around the bank. So to give an example, we draw upon the expert, the expertise of catastrophe modelers that sit within our insurance area and work with actuaries who've got a lot of experience of working on physical risk and how these physical risks change over time. We've got a lot of economists, as you can imagine, who can help us to look at how climate scenarios would be built up. So we do have expertise in the Bank of England, but what is becoming very, very clear is that not just the Bank of England, but for institutions, we're all looking at the same thing. We're all grappling with the same issues at the same time. And people with very, very deep understanding of climate issues are quite rare and they're incredibly in demand. We've chaired the work stream within the NGFS that's been looking at climate scenarios and there's a publication on this just in a couple of months ago that hopefully people will find useful. And for that, we used a number of institutes and the number of preeminent climate scientists to draw analysis together and it really shows just how complicated this stuff is, just how many models there are for looking at climate. And frankly, how no single experts have a monopoly on understanding what climate outcomes we look like. So to tie that up, we have expertise within the Bank, but we are a huge user of expertise outside the Bank and I don't think the climate problem can be solved unless we all work together and share expertise because everyone has one small part of the big puzzle. Great, Chris. Thank you for that. And I think the scenarios really show how we need to sort of dock these two often very different worlds of learning. I mean, the physical sciences and so on. And then obviously I'm back recommending modeling and stress testing to hit the two quite different worlds. So thanks for that. And I think the question for all the panelists, this is something that has come up. I think it's coming up more frequently. Certainly came up with the Inspire Festival last week. A question from Moritz Baer. Really, do we need to move away from or rethink the concept of market neutrality for central banks in order to contribute significantly to the low carbon transition? I'm going to turn to Simon Ali first and then come back to you Adele and Chris. Well, yeah, I think that that is really one of one of the key questions that needs to be addressed. And so my take on climate neutrality that whatever central banks do, it's never going to be neutral. So every almost every policy that central banks take will have kind of distributional implications. So even if you just take simple interest rate policy, if you raise interest rates or lower interest rates, you know, some people will benefit, others will lose out exchange rate policy, you know, kind of exchange rate goes up, exchange rate goes down. Some will benefit others not. This notion that central bank policy is kind of neutral, market neutral is, I think, a fallacy. Now, with respect to climate change, I always like to bring up Lord Stern, who famously said that climate change is the greatest market failure ever. And I think he is very right. So there are huge externalities that are not being priced in by the market. And if and financial markets, importantly, also are not sufficiently pricing in these risks, I mean, they're waking up now. And if central banks pretend that, you know, kind of the markets are efficient and already pricing in these risks and then they are perpetuating the imbalance we're having right now. So I think this notion of neutrality and that central banks can just kind of ignore negative externalities in the operations. I don't think this is the right way forward, but I'll stop here. I could go on for another. You could actually, but we wouldn't be listening to you because the session would have finished. So, so it's Simon, maybe you could just briefly add to Oly's wonderful insights and then Adele and Chris, I'll come to you. Thanks. Yes, yes. And thank you Moritz for bringing up this question. It is the big discussion right now how this market neutrality principle can be translated into policy in this environment of climate change and climate change related risks. My understanding is that this is that it's not just from the academic side that we are having this debate, but that also central banks are concerned with this. And I think Christine Lagarde was asked this question, at least by an MEP and then I think also more recently again. And so, so yes, there, this is being debated at least at least at the, at the ECB. The question is of course how this translates into into policy and whether it really calls for, for this kind of, or this specific calibration of asset purchase programs, which is, which, which is problematic if it leads to a to a carbon bias. I mean, in the context of the ECB, this is this is also interesting because the ECB is also tasked to support the policy objectives of the of the European Union. And if this if this if these policy objectives include now reaching climate neutrality by 2050, it will seem to see whether, whether calibrating monetary policy based on the market neutrality principle can can stand in conflict with this with the second objective of reaching climate neutrality. I think I'll leave it at this. Thank you. Yeah, so we need as we need a synthesis some new neutrality coming out potentially. Adele, how does this this this this concert to mark states to me obviously it's sort of it's a broadly adopted approach. Where do you think it's links with this debate on climate risk? Well, I think it, first of all, I think we should all keep our eye on the ball. The it's, it's, it's a bank shot to emissions reductions through central bank policy in the United States because we don't have a climate policy. We don't have a single regulation that directly curves greenhouse gas emissions. So, you know, the first best and most important thing in terms of emissions mitigation is to impose some sort of regulatory program, ideally market based, you know, adopt a reasonable and increasing carbon tax or cap and trade program. Pick your, pick your tool. And there's no way that the anything the Fed or other financial market regulators can do that is a substitute for that. We have to have a climate policy. And ideally, it should be under new legislation because under the Trump administration we've seen the vulnerability of a regulatory program that's, you know, pretty much at the administration's discretion. He just unraveled it in very short order. And so we need new legislation and it needs to propel emissions efficiently and ambitiously. So I want to, I want to start there. I think a lot of the focus on the Fed and other financial market regulators derives from frustration that our government hasn't done all that stuff. So people are looking to other powerful organizations to, you know, to, you know, pressure the economy in a particular direction. I'm not saying that central bank policy isn't extremely important. It's just not a substitute for the government doing its job. So, okay, now let's, let's just say, okay, suppose we did have a proper climate policy, then what is left in terms of fixing market failures or achieving particular distributional outcomes that the Fed should be focused on or the other financial market regulators should be focused on. And then there I think your toolbox lays out a bunch of really important things. For example, disclosure and making sure that markets know what the climate related risks are facing different companies and don't forget the municipal bond market either. I just wrote a paper that's coming out soon. There's an MBR working paper version of it called Revenue at Risk in Cold Reliant Communities. And that looks at the devastating effect a climate policy can have on the fiscal conditions of cold reliant areas in the United States. And that's the kind of disclosure when, when these municipalities are issuing bonds, the official statements should be held to account. And the ratings agencies should be held to account to incorporate and, and monetize those climate related risks. Okay, so that's an example where disclosure and all the enforcement apparatus around it is critical to getting marks. So the first best get the markets to reflect all these risks. And there's less concern about whether the, you know, anyone agency is market neutral or not, because the markets will be reflecting all this stuff. I'm not saying it's there's not work left over to be done. But, you know, I think the bulk of it is should be getting the markets right. And one quick fire response, a question in your sense of prospects for the Fed introducing some form of climate stress test as other central banks are doing maybe using the NGFS scenarios and so on. What's your views on that on timeframe in terms of years? I think the first thing we're going to see, and this might depend on the outcome of our election and other factors that are influencing cool winds are going. We're going to see the US join the NGFS like that's actually a big step for us. And then I think so and my inspired project is to look at what positions the US could actually take within the NGFS agenda. I don't think it's obvious that that that the US necessarily adopts the particular scenarios that are embedded in that we might have to develop our own scenarios, particularly because we don't know what our policies going to be. Right now we have eight different carbon tax bills that have been introduced in this Congress. They have different price trajectories. They have different uses of the revenue that all sorts of differences. And that's just within the carbon pricing policies. Never mind the clean electricity standards and all the other dogs and cats that have been proposed either legislatively or in principles within the Democratic Party. So we don't know what all that stuff is going to be. So when we think about what makes it for a sensible, certainly a transition scenario in the United States, we're going to want to span that range of policy uncertainty and make sure we have scenarios that reflect the policy uncertainty as well as all these other factors that can go into the impacts of the transition. Great. Thanks Adele. So, Chris, I mean, this point of market neutrality, obviously a sort of founding stone of sort of central bank practice for many years. And your reflection on how we look at that core principle in the context of dealing with climate risk and so on, sort of how we need to update it, change it, adjust it or leave it as it is or what's your sort of views there. Thanks. Well, just to just to reiterate the point that Adele made, I think parallel to this, we need to make sure that the markets are reflecting risk as quickly as possible. And there's, I could talk for hours about this, but there's a whole load of things that we can do to make that work. One is increased level of disclosure. And the UK government is working on a project to determine whether mandatory disclosure should be brought in and over what timeline. The second one is making firms understand climate risk. And one of the ways to do that is to do scenario analysis and to understand what these risks look like because data from the past is not a good indicator of risks in the future in the climate world. And that's one of the things that we are really, really pushing on. And another area which we've looked at and which the COP unit, so the cross-governmental team that's been drawn together to lead our efforts towards COP26 is to look at what are the metrics that we can use to understand climate risk better. For example, how do you develop a portfolio warming metric that is comparable and allows you to see where climate risk exists? So you say, I think that has to be a key focus of ours. But that is not going to happen overnight. That's going to take a while to embed. So in terms of market neutrality, I think this is exactly the right question for us to be asking ourselves. And as I mentioned, Andrew Bailey has said that this is something that we should all be exploring. And he said that he wants the bank to explore it. I think it does throw up some really, really interesting questions that need to be worked through. For example, I mean, there will be a distributional impact of going away from market neutrality. And that's something we need to understand. Also, if you're going to be picking certain stocks over others, what is the basis that you're doing that on? Are you doing it on today's basis? How brown is a firm's activity today? Or are you looking at how brown that activity will be in the future? Because there are some firms that are brown today, but they're looking to transition quite quickly. And there's other firms that are brown and they're not looking to transition quite quickly. How do you create the right rewards incentives in this? And do you have the data to do that? These are all really big questions that we need to look through. And from the Bank of England's perspective, I think we made the point that different central banks have different portfolios. So from our perspective, actually 98% of our portfolio is invested in gilks. So 2% is invested in corporate bonds. So moving away from market neutrality might not actually have that much impact on the overall Bank of England portfolio. But that's not to say that central banks don't have a broader role in providing leadership to the market. But when you look at other central banks, particularly in Europe, I think the impact would be much larger. And I think that's why you're seeing some areas pioneering analysis in this area, because it is such a big deal for the portfolio that they hold. Well, thanks, Chris. We're going to have to bring the session to a close, but maybe one of the points is of this sort of fiscal monetary coordination. Adele, I think you highlighted that in terms of obviously the centrality of carbon pricing. And I think signals from regulators whose job to maintain financial stability to the fiscal and the representable authorities that actually this is what they need. They can't function properly without it. Very, very important. And then I think, Chris, your point about sovereign bonds, really, really important. And clearly, as we go to aligning the financial system with, let's say, the net zero target, we're going to need to have sovereign bonds aligned with two degrees or less. Some sovereign bonds are near to five degrees temperature warming. I think in your portfolio is about 3.5 degrees temperature warming, I think. So I think actually that sort of again signals from the central bank, based on your portfolio and your analysis back to the guys who actually issued the sovereign bonds to ensure that they are aligned, I think is really important. Thanks to all of you for joining. I think we're going to have to close. I can see someone in the questions had referenced a paper by Hugh Cheney on precautionary principles. That was a original analysis that actually came through this by a program as well. And I think we're on the hour. So I'd like to thank you for joining. I'd like to thank Simon and only for presenting. There'll be another edition of the toolbox coming to email chain near you. And thanks to you, Chris, for your insights and Adele. Thanks for joining and also congratulations to the report and please get some rest. So thanks, everyone. And we're done. Thanks so much. Thank you.