 My name is Nick Robbins. I'm a professor of practice at the London School of Economics, one of the co-authors of this new second edition of the Toolbox of Sustainable Crisis Response Measures with my colleague Simon Dickow, also from the LSE, and also Ulrich Volts, who's director of the Centre for Sustainable Finance at SOA as the University of London. This toolbox has been produced as part of the Inspire program, and as you know, Inspire stands for the International Network on Sustainable Finance Policy Insights Research and Exchange, and today we're hoping to exchange insights from research with you and really think about what we can learn from the past year in terms of COVID climate and sustainability, and particularly to think ahead, to think ahead how central banks can act as important anchor institutions in the green and inclusive recovery that we hope will come after this terrible crisis. Sorry for the technical glitch earlier. I hope you're all managing to join, and we will have a very active discussion. First, we'll have a presentation of the findings from the second edition of the Toolbox, from Simon Dickow and Ulrich Volts, and then we're delighted to have three experts to act as respondents on this, really to think about the implications of the findings, to give their comments, their critique, and also perhaps to think ahead in terms of what could happen next. So first we'll have Irene Hemskirk, a senior policy advisor on climate risk and sustainability at the Netherlands Bank, the Dutch Central Bank, and also advisor to the chair of the NGFS, which is obviously a very important, Irene has previously worked within the NGFS Secretary. Then we'll have Danai Kiriakopoulou, who is the Chief Economist and Director of Research at OMFIF, and also OMFIF obviously has been doing a lot of work recently on sustainability, and then Pierre Monat, a senior fellow at the Council on Economic Priorities, and also a member of the Inspire Advisory Committee. So after the panel has made comments, and we've had a discussion, obviously there'll be a chance for you all to ask your questions. Please do that by raising hand or putting comments in the chat, and we'll have an opportunity hopefully maybe for you to participate verbally in the discussion. While the presentation and panel discussion is going on, we'll keep you muted and videos off just so we can focus on the people who are speaking, but we can lift those later on. So without further ado, sorry for one final thing, this session will be recorded and the link will be made available. So without further ado, I'd like to turn over to you, Simon and Uli, to take us through the presentation. Simon, Uli, over to you. Thank you. Thank you, Nick, and hello and welcome everyone. So Simon, can you have the pleasure to present the second edition of the Toolbox, where Simon will be quick. Next slide, please. So central banks and supervisors have taken extraordinary measures, both in the nature of the response and also the scale of the responses to the crisis. And these have been very important to stabilise the situation. And now, of course, going forward, they also have to play a very important role in supporting economic recovery. We've seen over the last year a strong deepening of the commitment of central banks and supervisors to address climate and other sustainability issues. The NGFS has grown now to, I think by the latest count, 75 members. And so we really see a lot happening in this space. So one can say we're going in the right direction. But in this second edition of the Toolbox, we look at what is actually happening in practice. We put forward in June the first edition of the Toolbox, where we put out an overview of possible measures and instruments that central banks and supervisors could take concretely to align their policy responses with sustainability goals. And so here we're taking stock. We have a global sample analysis of a global sample of what's been happening. And Simon will present that in a moment. But next slide, please. Let me briefly go through what the main rationales are for making sure that central banks and supervisors address sustainability issues in their concrete crisis response measures. And of course, everything, all these arguments are also supporting kind of long term engagement. But this crisis has really brought to the fore the vulnerabilities of our economies and societies. And it has shown that we need to be better prepared to deal with systemic risk, including climate change and other environmental challenges. And the crisis has also arguably accelerated various fundamental trends in the global economy, including bringing forward the peak in global oil demand by multiple years. And Simon, if you can go to the next slide, please. We put forward in the first edition of the Toolbox, four main reasons why central banks and supervisors really need to tackle sustainability issues in their responses and really align them with the SGGs and also the Paris goals. The first one, very simply, is that central banks need to make sure that their operations and also their balance sheet properly reflects and accounts for these various sustainability risks. Secondly, they have, of course, an important role to play to make sure that individual financial institutions also take these risks into account to ensure microprudential stability. But then, of course, we know that especially climate change also poses a systemic threat to financial sector stability. So microprudential policy needs to take account of these risks to avoid the buildup of new climate risks in the financial system. And, falsely, they're arguably is a role for central banks and supervisors in supporting broader government efforts to help scale up sustainable finance and achieve the SGGs and Paris goals. And kind of the obvious caveat, we're not saying that central banks and supervisors should be the only ones in town who make all this happen, but arguably they have a very important role to play in this. The next slide, please. So just to recap, the toolbox we put forward in June provides an overview of a large number of different tools that central banks and supervisors can use in a sustainability calibrated way. So the tools are clustered in three different groups. So monetary policy, prudential policy, and other policies. And we list basically kind of the tools in their conventional form, which is usually sustainability blind, but also in a sustainability enhanced form. And so there are a lot of tools that have been used for the first time by many central banks in their crisis responses. But as Simon will show now, these have been typically not used in a sustainability calibrated way. And we argue that this is actually very important to avoid the buildup of new climate or sustainability related risks going forward. And with this, I hand over to Simon. Yes, thank you, Uli. So I will briefly discuss what we found in practice and then outline our ideas for what the next steps could be. So how sustainable is the current crisis response in practice? We have investigated the policy response of central banks and supervisors in 188 countries. And this is based on the IMF's response to COVID-19 policy tracker. And our key findings are that all the instruments or almost all the instruments that are included in the toolbox are currently being used as a crisis response measure by central banks and supervisors. Although, and this is the crucial point here, not in a sustainability enhanced calibration that we are proposing. So generally, we have observed that central banks have moved very quickly to expand their collectible frameworks to include a broader variety and quality of assets. And then many central banks and supervisors have also used counter-surgical capital buffers and general micro and macro prudential regulation, yes, specifically micro prudential and supervisory standards. Yes, so this figure provides an overview of the relative use of the different instruments in the nine categories of the toolbox. I think altogether we looked at around 400 policy response instruments in these 188 countries. And yes, as you can see with the exception of changes in central bank portfolio management practices, which is our category A tool here, all instruments have been used and unsurprisingly the adjustment of indirect monetary policy instruments, our category two, yes, our category two here is used. It's the dominant crisis response instrument. And this is, but yeah, this is followed by a change of micro prudential instruments, category five in, yeah, in around 40% of the countries. And usually these changes are implemented as a release of supervisory requirements here in this category. We think altogether this figure shows the broad variety of instrument categories from which financial policymakers have grown their crisis response. So very, very broad approach, lots of instruments have been used. And yeah, what I will discuss next and what is important here to note is that the initiatives that fall under our category nine here, supporting sustainable finance are not crisis response related, but these are independent initiatives that have been launched during the time of crisis. Yes, so now turning to the sustainability dimension, we have found that in only one economy, the monetary authority has explicitly calibrated a crisis response instrument in what we would call sustainability enhanced way. This is the reserve bank of Fiji which has raised its crisis response import substitution and export finance facility to provide credit to renewable energy businesses at a concessional rate. Yes, however, as shown in the figure central banks and supervisors in 40 economies, 21% of the total have taken steps to address sustainable finance and implement related policies in parallel to the crisis response. And yeah, as mentioned before, these are not direct crisis response measures. With regard to regional trends, we found that central banks and supervisors in Europe and East Asia have been most active in terms of introducing these parallel sustainability measures and yeah, heavily skewed towards high income towards central banks and supervisors in high income countries. Okay, so yeah, looking forward priority areas for integrating sustainability factors. So generally with the toolbox, we want to provide a framework for categorizing the range of measures that central banks and supervisors can take to support a sustainable recovery and to ensure that their crisis response measures do not have unintended consequences in terms of enhancing climate and other sustainability risks. So this is our general aim here. And it will of course be important to do further research on these and to explore in greater tech, as Nick mentioned, in greater technical details how this can be done in the future. And we like to think that the updated toolbox provides a starting point for achieving this integration of sustainable finance policies of sustainability in the crisis response frameworks. And we would like to highlight these four priority areas here where the discussion could start. First, amending collateral frameworks to account for climate change related and other environmental risks. This is because a lot of central banks have moved very quickly to expand their collateral framework. So why not also take account of these risks. Secondly, removing the carbon bias within corporate asset purchase programs and align refinancing operations with Paris agreement goals. Again, because a lot of central banks have moved very quickly to expand these programs, we would like to see these other goals implemented here. Then third, adjusting potential measures to minimize climate risk and strengthen disclosure of disclosure and stress testing requirements. And then finally, adopting sustainable responsible investment principles for portfolio management, including policy portfolios. My last slide. Yes, so in terms of next steps, we think that it would now be important to bring together these two largely separate tracks of crisis response and on the other hand, sustainability commitments. And regarding the easing and credit expansion policies, it would be important that sustainability considerations are incorporated to avoid a significant expansion of lending to economic sectors that are not aligned with economies transition plans. And under these ambitious transition plans, this expansion could constitute a significant investment in essentially stranded assets. That's the danger here. Then the widespread and undifferentiated counter cyclical release of regulation and supervisory expectations in phase of significant transition and also physical risks is very problematic. And we would argue that if prudential measures are released, assets and related exposure to sectors that are bearing the highest transition risks should be exempt from this release. Then, well, the NGFS and as well as national central banks and supervisors have made significant progress in expanding their capacity and knowledge on climate change and related risks this year. And the implementation of these measures that are being discussed should be brought forward and be applied to the crisis response measures is an important point here. And then finally, further dialogue and analysis is needed to explore how well established approaches such as the market neutrality principle can be updated in light of market failure such as climate change and last but not least biodiversity loss. And with this, I would like to hand back to Nick and our panelists. Excellent. Thanks very much, Uli and Simon. Thanks for that analysis. And I think really we want to sort of look at some of the findings you've presented and then also really sort of take account of what you put on the last slide about actually this potential for conversions. So I think we can probably end the screen share now and just have people instead, which is always nicer. And the first person I'd like to turn to is yourself Irene from the DMB. You've been really at the heart of a lot of this agenda of the past year and I really welcome your reflections on this research and also where we are in the evolution of practice around greening the financial system. So Irene, over to you please. Yeah, thanks so much, Nick, for inviting me to this meeting on Wednesday morning. Pleased to meet everyone again. And thanks so much for the work Inspire has been doing on this because I think we've been voicing the importance from green recovery since quite soon after the pandemic hit most of the world. But I think the progress report you published today really shows what else can we do as central banks and supervisors. So it's been really helpful to work with you on this and to see the results. When I read through the document, the thing that came to my mind is did the pandemic arrive too early or are we too late? A bit like that because in one hand you see that there are so many good things set out in the document. But I think some of them also still take a bit of time to really adapt them in our work on the crisis responses. And ideally, you would have this all in place and then have a pandemic crisis and you'll be set up. So that's what came to my mind when I read it. But still I think we're unfortunately still facing the effects of the pandemic crisis. So it's not over yet. So this is not too late the work we're doing. If I look at them, the four priority action points that you set out, the first two amending collateral frameworks and removing the carbon bias with corporate asset purchase programs. I think this is really still much under debate. I'm pleased to see that there has been a bit of a movement. Like now we're not talking anymore about that this is not an issue. I think even like the interview Jens Weidmann gave a few weeks or the opinion he said in the FT a few weeks ago about this topic also that the European Central Bank is incorporating this in their strategic review the coming months. I think these are signs that central banks are starting to take this seriously and see how they can move forward with it. For the other points on how you really incorporated in your prudential framework. I think here within the NGFS we've seen of course that many members are moving up on this. And also the publication last Friday of the European Central Bank with their guide for with expectations on climate related and environmental risk what financial institutions should do. And also the ambitious follow-up tied to that that they're really going to look how banks and insurance banks incorporated this in the coming year and they also are looking closer to the disclosure topic. I think here I think here they're big movements. And with the NGFS membership growing still I really mentioned 75 oh yes it is and we're still growing. So I think this is a sign that more and more central banks and supervisors are taking it very seriously. The other thing is that it's not just the NGFS anymore it's the FSB it's the BCBS the IAIS IOSCO and I think it's also important to mention here the work the IFRS will be starting with launching their consultation on a sustainable reporting framework. I think this is an important next step as well to to have all the pieces together on this topic so we can really move forward with on the on our prudential side. And the last topic that's on the priority list is adapting sustainable and responsible in fact investment principles for portfolio management. I'm pleased to say that in a few weeks time the NGFS will publish a progress report. So last October 2019 they published a sustainable responsible investment guide for central banks on their portfolio on their reserve management and now they're publishing a progress report and yeah it's good to to see that we have movement there as well we will publish the result of course more in detail but I also see there a positive trend. So to sum up I think the work we're doing you have been doing contributes us and and keeps us a bit sharp to to to look into the all the options we have. We try to contribute within the NGFS and beyond to to really move forward on this topic and I'm also pleased to see it's it's not that we're just we're really trying to do both at the same time responding to the crisis and building a more sustainable economy. So I think that's that's quite unique because usually people are distracted of the moment of the day and now I think we're still looking to the future. So I'm looking forward to the discussion with all of you. Thanks so much. Thank you so much Irene that's very very thoughtful. I think it's idea that actually that the sort of the for in terms of the crisis response and climate change perhaps the panoramic came a little bit too early that actually climate change wasn't yet totally instinctive in terms of response and I think that's a comment and very interesting to come back maybe it does maybe some of what are the the practical in the discussion some more of the practical themes that we would need to focus on to to enable that and then yeah it'd be really interesting maybe in discussion to think about the points you made about the portfolio management. Obviously a number of on the sort of private finance side a lot of asset owners are setting net zero targets so it'd be interesting to think about that what that means for the central banks and then you set out all this acronym blizzard of all these different names but it does mean that we've got to think particularly in terms of a sustainable recovery obviously at this sort of systemic response all those authorities you mentioned BIS and FSB and ISCU IFRS and as well as obviously the finance ministers and particularly I think in the G20 next next next next year so thank you thank you for so much for setting that out I'm going to turn from the Netherlands where we've got some wonderful trees in the background to you Danai I think in in London and Danai over to you obviously on my on-cliff it's really been stepping up your work on on sustainability very nice get your feedback on this toolbox so over to you Danai thank you. Thank you Nick and thanks for inviting me to take part here it's great to be on this panel with you all and congratulations on the publication of the second edition of the toolbox I think it's a very impressive document of work to all of you who haven't read it I highly recommend it and I think my reaction to it was wow so few central banks are actually aligning their crisis response to sustainability I think the slides that Simon and Uli presented are quite a wake-up call because on the timing we are seeing that yes this is a big opportunity to really not go back with so many stimulus programs to the economy that we had before because it's we are increasingly realizing that it's not sustainable and I think it would be a very very huge shame if that opportunity is wasted I was also thinking a lot about the timing and have been thinking about it quite intensely and reading this this report so it's interesting that Irene brought that up as well I think there's two ways to look at that on the one hand it is good timing because there has been there had been quite a lot of momentum on the sustainability agenda so when COVID hit I think the intellectual framework to interpret this as here is the source of a non-financial risk that is having systemic financial impacts of the on the economy was immediate everyone got that and it was kind of sharpening the awareness that yes we need to protect ourselves against similar risks in the future whether that is climate change whether that is loss of that biodiversity and also not see these things in isolation but see them holistically on the other hand I think it did come a little bit too early because we haven't yet made the full progress on things like disclosures taxonomies we are closed so in that sense it wasn't that bad timing but I think if we already had the taxonomies there if we had already some of these measures were already there it could it would have been much easier to just implement sustainable policy responses but it's good that that at least we have the opportunity to do that in the next two to three years perhaps I think given that we are seeing central banks step in not just in advanced economies which is what we saw in the previous crisis a lot of quantitative easing programs for example which are one of the areas that that the report highlights where sustainability can be part of it the corporate bond purchase programs for example the QE programs we're now seeing a lot of emerging markets do that as well and I think that is something new in this crisis where there is an opportunity to integrate sustainability I think when we think about the the rationale for central banks to do that I think the report does that very well I think it's important that it differentiates between the kind of risk motivation that it's about protecting central bank balance sheets against the potential market failure and the potential climate minsky movement as it's called where stranded assets will lose value and so on I think you do make the point in the report that central banks do have the power to protect themselves against that if they if they want to by printing more money etc but I think I think the report makes that point well the other argument of aligning themselves with government policy I think that's the more controversial one where we are seeing debates now you mentioned also before and Irene mentioned also about the the market neutrality question and I think the way to do that in the the lens to which to view it is that governments have already committed to the Paris agreement it's not a political an active political choice that central banks are making they're simply aligning themselves with the political choices in the countries in which they operate so in in a way it can also be viewed the other way if they don't align themselves then that is a political choice because they're going against what what the policies of the elected representatives are are pointing to then in terms of the of the tools um sorry of the of the what next and the and the priorities that the report sets out I think on the on the question about removing dealing with carbon in 10 industries perhaps and kind of making sure that lending to sub sectors is minimized and that if there are no if there is no transition focus they are not part of the portfolios or or that central banks regulate banks in a way that that loans to such sectors are lowered I think that that goal will be easier to achieve in the future because up to now we didn't really have the data to really identify how each particular company or sector is is making is making that transition and so the choice was a very black and white one of either you divest or you you take the marketing principle and therefore you because it's part of the market I think now with more advances in data we will be able to target more specific and not just exclude because they're in a dirty industry but help them transition with win and I think that will be a difficult central banks to do in their own portfolios because they they don't yet have in their toolbox for equity shares and can use their voting rights to steer a company in a more sustainable direction we're talking about climate change but there's also other other factors sustainability things like inequalities things like governance diversity and governance for example we have seen also the pandemic affecting different groups of society differently increasing inequalities and so on and I think that will be a bit more difficult for central banks to do but for the broader financial sector and I think that's the same with portfolio management and I think that's also a tricky one because I I've seen the guide that Irene was talking about that would that the NGFS will publish soon and and it it says some good things but at the same time when it's about central banks in in total their reserves their foreign exchange reserves are around 14 trillion dollars collectively so they are investors with large holdings they cannot exclude and then still have assets to to invest in they invest in equities so that does buy very much but if if you exclude certain sectors in total and you're a big investor then there's not that much left for you to invest in at the same time to invest in sustainable asset classes is also not as much as of an option now because they may be crowding out in the next because it's a very very affordable asset so the green bond market for example is very small compared to the overall fixed income market so if central banks want to invest actively sustainable investment products there's just not enough of them there right now and if the supply should grow as well so I think that's where we need to do more work going forward I think the report sets the right priorities I think the the rethinking of the industry reviews for example of the principle of market neutrality is an important one as well and it's great that the report highlights that um so I think we are on the right way the advances in in data and the realization also for a lot of investors that this is not just for a reputation but is for the risk in our portfolios and that includes the central banks is the right way forward thank you Donna thanks so much for that I think that's that's really interesting as you were talking particularly about the portfolio management I was struck one of the research areas which inspires working on I know that many on people on the call Royce working on is the area of of sovereign bonds and clearly the moment one of the the things we've seen is this is extraordinary issuance in in in sovereign bonds by physical authorities obviously to to pay to keep the economy going to keep livelihoods going and businesses going and obviously central banks are large holders of of the sovereign bonds so really sort of thinking ahead that actually yes we have I know 16 or so countries which are this is green sovereign bonds but if we're thinking between now and 2050 then all sovereign bonds need to be if we're just talking about climate change need to be aligned with net zero so there could be a quite an interesting dynamic and not necessarily buying this tiny slice of green but actually that fiscal monetary coordination ensuring that over time that those holdings are actually aligned with net zero so I think that'd be quite an interesting and quite a strategic approach that could go forward so then I thank you for that and thank you also I think also we we mentioned we heard and I think in in your presentation Simon early also this question of developing an emerging economies and maybe we can come back to that in discussion because clearly as as Uli has done in another report there are also concerns about sort of a sort of debt stress that's rising up in this agenda so we might want to come back to that but Danai thank you so much and for our last respondent before we go more to a discussion Pierre we're going to we're going to go south and head to the mountains and go to to you in Switzerland so Pierre your thoughts also doing great work at CEP but also you're a member of the Inspire Advisory Council so I'm very good to hear your feedback thank you thank you Nick and then first congratulations for the for the work done with this report I think I mean it's a very extensive extensive review of of what have been has been happening it's a it's really full of useful information for everybody working on central bank and system ability so I really recommend it's reading what I would like to reflect a bit is the lessons that we can learn from COVID and that your reports also highlights and and the lesson that we can learn for let's say the next crisis to come the climate climate crisis I think we've been through a live experiment of a transition shock very sudden and very sharp with with with the COVID crisis so we went from a perfectly functioning economy to a almost total lockdown and and we've seen what transition shocks if not manage well how disruptive they can be and and with climate change we're going to have the transition as well so whether it's a business as usual we're going to live in a totally different new world five degrees hotter it's it's a transition to another another planet or we're going to transition to a low-carbon economy and then we have to also totally re-adapt our way of producing things and and so this is a transition shock as well and it might be not as sudden as the COVID the COVID shock but it we need to keep in mind that that it will be accelerating so the effect of climate change really what we see will be accelerating now when it comes to the reaction of central bank what I think it's what I think is interesting is that we've seen its large scale and it was everywhere in the world and that's also just the same thing for climate change it's going to be a large shock probably with also the implication that central bank will have to be to have large reaction and it's everywhere in the world all central banks do that what we also have seen with with the reaction to the COVID crisis is that central bank have used a lot of more of the same more asset purchases work with collateral refinancing operation at larger scale and and I will come back on that later but we also have seen some creativity or seeing some some some borders that have been passed like you know the Bank of England financing the government directly with a way and means facilities or I think the Fed now is also sending like lending lending directly to firms so that's and I think we need some creativity for the for climate change as well now for everything that is more of the same asset purchases collateral prudential policy targeted refinancing operation everything that has been used to fight the COVID we have green solutions whether and these solutions are are being examined by central bank they've been I mean they are on the table since three four years so since three four years we say you know integrate climate risk implementation regulation you know change your collateral better target your refinancing operation so so for all these tools and the way they've been they've been they've been used in the COVID crisis is totally in line with with some of the suggestions that are on the table now so it shows that it it basically works now last thing that I would like to to highlight is the COVID crisis as as highlighted that we we better to be prepared to like last big shocks and then and it's better I mean we know the kind of reactions central banks can do if we prepare in advance the technical solution for the implementation also like you know a lot of criteria need to be in place who will benefit for from from from the air something like that I think it's better to to to think in advance and and and be prepared for that and especially because climate shock whether it's transition or physical they the large scale there and the njfs highlighted it they are foreseeable we know that they will happen whether it's higher physical reason less transition risk or the opposite so the njfs says highlight it it's foreseeable and it's irreversible it will happen so we have no excuse not to be prepared there the good news I would say is that that so that the climate shock will not be as as abrupt as as as covid shock so you know you can have you can have time to to implement policies that for central banks and financial regulators progressively to introduce them so slowly it's not going to be a in in one month like you know so you can do it progressively and slowly but you have to keep in mind that to change the path we are in we have to act now so it's not because you can do it slowly that you know should not start very soon um and and also I think it's very it's it's totally it makes sense for central bank to do it because if you start to adapt now then you smooth the shock and and that's you know you are the smoothest shocks to price stability to financial stability so it's really in the in the essence of central bank to do something like that now when it comes to your and that's what that would be my last point when it's come to the solution that that you put forward and the priority that you said I would put a high priority on integrating climate risk into monetary policy operation and and potential regulation so we know so first managing risk it's in the mandate of the of central banks for for financial stability reasons but also for their own balance sheet it's it's good practice for central bank to have a sound balance sheet and selects the risk they take so it's not a question of mandate it's really a normal practice of central bank and then for risk I think the situation is clear we have with DNGFS and and the FSB and others have identified this risk they say it's large it's a risk some banks are exposed to this risk plus there is a clearly identifying market failure there in term of climate change so so we could be in front of of of sharp of sharp repricing so there is so there is a need to realign the financial sector to decrease this risk better manage it and that's and I think that's that can be done through financial through a potential regulation but also in policies that that incentivize banks to decrease their risk exposure and last point I think central banks balance sheet as any balance sheet is also exposed to this to this climate risk and and I mean that's something that I think that I then I would agree with it's it's a no-brainer for them to better to better reflect this chemistry in their operation in in the huge portfolio that they have now and and for that there is no excuse for no action the data are there so we just we will publish this week a report showing that that we have a risk assessment available for firms like risk climate risk exposure assessment and we have you know several of these assessments and these assessments what we found is that they tend to converge on identifying the risky firms and the safe ones so so they are usable and you can you can today start working with them and and use them in your in your decisions that's what I wanted to say. Well Pierre I'm very glad you said that because I think I was I was very very wise I thought actually and maybe just I think you said there's no excuse excuse for inaction in your last few sentences and I'm just sort of thinking now about our participants just for no excuse for your inaction either so please get thinking about questions that you would like to ask but I've got a few really from listening to the both the presentation Uli and Simon from yourself and also to Irene and Danai and and to and to you Pierre. I suppose the first question maybe sort of building on where we started with with the toolbox and with yourself Irene your comments is sort of I think we've identified some of the sort of certainly some of the tools that need to be taken as a matter of priority but perhaps where are the sort of the practical issues that would need to be resolved I think Pierre in your last comments you were saying that actually there are sort of green versions of these mechanisms refinancing or collateral or asset purchase that have been proposed but they haven't quite landed yet and I suppose it would be interesting to identify sort of some of those issues so I don't know Uli or Simon whether you have any reflections or I'm going to ask the panellists as well your reflections there and then the other question I'd like to come back on I know we're we're all sitting here in in Europe but I'd like really also maybe some reflections on sort of some of the issues for central banks and supervisors in other parts of the world but this is this question first perhaps in terms of some of the sort of the really practical issues Uli and Simon to come to you then then go to the panel with you starting with you Irene. Yeah thank you Simon and thanks everyone for for really very thoughtful very good comments I think on the issue of you know how ready are all these measures and tools to be implemented I would say of course the devil is in the detail so you know kind of central banks supervisors want to be very careful in you know whatever new measures they implement but at the same time I think we really have a problem in so far as there has been always the discussion going on for many years now oh we need more granular more granular data we need more you know detail on this and that to really understand how how if we should be doing how we should be doing it and in principle I agree but at the same time there really is a very large urgency in all that so Pierre alluded to that I mean Pierre said you know we have more or central bank supervisors have more time to shape their responses to climate change than they had you know to respond in responding to the COVID crisis I mean that was really like overnight decisions that had to be taken but you know we have been now having these discussions on on on what central banks supervisors should be doing for a couple of years and of course the the discussion has advanced a lot but I do feel we now have a relatively good understanding of the main issues so some very basic principles and and I think you know I mean let's say when it comes to to assets purchase programs I think that it's beyond doubt that certain types of assets you know are at much higher risk of being stranded and of course you know there are different shades of green and so on but but for example central banks excluding fossil fuel assets I think that that that doesn't really take a lot of sophistication and I mean more than anything it would send a very important signal I think you know the central bank balance sheet if you look at corporate asset purchases in the grand scheme of things it's actually not that important and central banks will not go bankrupt because of you know having some stranded assets from fossil fuel companies in there but I think it's really more about the principle central banks supervisors have been very clear in pointing out two significant financial stability risks and and they have been demanding from financial institutions to take these risks into account so they need to be leading by example they need to integrate these risks into their own operations and of course also monetary operations and so I would say one part is really the signalling and some very basic actions can already help quite a lot in that respect but then sorry and then some very concrete actions you know mandatory disclosure you know mandatory stress testing and so on okay we may not have the perfect climate stress test yet but we have I mean the NGFS was published two months ago volume with you know really good examples 39 examples from different financial institutions and and and you know there's a lot and and so this can be directly implemented and it would send a very important signalling effect and it would really force everyone in the financial sector to to get their act together now okay thanks Ali Simon I mean you've been really in the engine room of this this report and so reflecting I mean you're just maybe before I move on to you Irene so many thoughts particularly on this sort of what might be some of the bottlenecks practical issues which may be a sort of holding up this convergence clearly lots of central banks committing to climate action but not yet supplied to crisis response directly Simon any any thoughts yes yeah maybe to to pick up on something that Danei and and and Pierre mentioned um I mean it is very interesting that not just in emerging markets but also in advanced economy the economies the central a lot of central banks moved very quickly to support employment in in with regard to supporting SMEs and I mean one obvious reason for this is that it's very easy to identify SMEs for example just by the number of employees and so this is something a lot of central banks just did they just supported SMEs and I mean you could call this I mean of course they did this with different instruments for some of them this was clearly a directed policy or they directed banks to lend to SMEs or others just created incentives but it was very easy to identify this um I mean I would argue that to some degree the the European taxonomy of sustainable of sustainable activities provides a nice framework to to identify which of these activities are sustainable so I mean if central banks showed us that they can support certain sectors the SME sector why not combine this with with an assessment to identify which of these are sustainable and this is this is not just so I mean this is something we we we see of course in emerging markets a lot of central banks promote certain sectors but this is now also something we saw across the board so a lot of central banks supported SMEs and but Danae is absolutely right identifying what is green is is difficult but the EU taxonomy provides a starting point then just to respond to to Torsten's comment here in the chat um I think collateral framework the collateral framework changes are something very central to look at if if transition risks are something that could be I mean this could be a starting point to just just focus on transition risks not do any direct I don't know not do any promotional or qualitative um changes of the of the collateral framework but just try to somehow account for transition risks to kick out those assets that that really carry a high risk so this could be a starting point to look at at collateral frameworks and of course this would then tickle down through monetary policy applied to all the policy portfolios of central banks so this could be a very powerful step thanks very much Simon I think what what's interesting to me at the moment is looking at maybe investor practice and how that is shifting towards really asking the companies they invest in for credible evidence of net zero transition plans so not just looking at where the companies were last year in terms of their emissions but where they're going to be with regard to their emissions and their products and business models for 2013-2015 I think that would be a forward-looking signal that central banks can send that actually what they're looking for obviously is companies to be aligned with those those pathways rather than just what's what they did last year so Irene maybe and I'm going to send to the panel on this just your reflections again as a practitioner within a central bank on some of these sort of really sort of practical things that would need to be addressed so that central banks had confidence to make these linkages and again I suppose not and again practical in the sense of sort of where where we could actually start the process and then sort of learning by doing but any reflections on you from you Irene yeah thanks it's it's been really interesting listening to to everyone and yeah I've been thinking a bit from from the practical issues the one of them yeah I do come with a bit of the list of usual suspects I have to say with the disclosures of course being I think being identified as a really important one and and I really like the example I think it's in your I think it was in your toolbox as well but what Canada did on the TCFD requirements disclosure requirements if they support right to have these kind of elements really integrated and why why I start with disclosures is that it it really will help central banks and supervisors I'm I'm taking it more from the supervisory aspects here to to really better identify the the risk or the financial institutions can better identify the risk and then the supervisors can do that so we need better disclosures on through the whole program and then the other thing I think we touched on was the the mispricing of these risks right and I do want to emphasize again that the CO introducing a CO2 price at some point could really be be helpful but this is I don't think this is a practical solution because it will take so many many people involved to to really decide on this but yeah I think the from the supervisor side we're just trying to move ahead we're we're looking into okay what are the risk identifying it and and thinking about exclusion maybe we should do that a bit bit more in detail as well to really see can we exclude certain sectors will that help but to have a bit of a policy backing there could and a clear transition path could could really help so that those are my short reflections and I think a bit more in the meantime I mean I think the disclosure point and I see that sort of there's some good discussion in the chat on this I think this goes which is good and actually I think maybe making the linkages let's say between between the provision of financing through monetary operations to to at least disclosure and perhaps more I think would be good because then that would really align the incentives I think that's very very good. Danai Pierre anything more on these sort of practical barriers that we need to bust in the next few months I mean again and I'm talking in the next few months these aren't long-term research projects but actually this is what's crisis is still with us but Danai Pierre. Yes thanks Nick I think actually Ulysses response to that was excellent and very comprehensive I agree with a lot of what he said and I'm aligned with that I think it's very important for central banks to stress in the coming months and to take really that approach that we shouldn't make the perfect the enemy of the good because if you look at what are the stumbling blocks why are we seeing in your report that so few central banks are doing that what is stopping them they have joined the NGFS they have recognized that these are risks so why are we not moving ahead and I think one of the things that that come up again and again is that we do not have enough data we do not have enough information we cannot introduce green supporting factors for example because we don't have proof that green is free we don't have the taxonomies and I think I like a quote from former executive board member of the ECB Sabinella so it's important to some things that are very very obvious I mean Ulysses gave the example of fossil fuels in portfolios right and I think it's it's about what can we already do now and and also how do we present that the rationale for central banks to take this action is it and and I think being very rigorous about that also in their communications that it is because of the risk would really help because you still see a lot of central bankers come out and say that we don't want to be involved in politics that government should introduce a carbon price yes this is all correct but I think the way you communicate also matters and if we spend all of our energy talking about this will damage our independence this will get us into politics they are public institutions they are in the public eye but I think they should be emphasizing that there are some things that they can already do and I think on the exclusions we will have now more data as I said in my original intervention which means that they will be able to to zoom more closely into exactly which activities of this company we can focus on one thing on disclosures because this has been mentioned a lot I think we need to be a little bit more careful about that because I think there is a trade-off there and you want to make sustainable finance and the progress very inclusive and I think disclosure sometimes is something that you need you need to be careful how you bring everyone on board for example emerging markets SMEs that may not necessarily have the resources and the capacity to comply with disclosure requirements so I think it's not a magic wand where you make them mandatory and you have the information I've done various discussions with also development banks that are very hands-on on this in emerging markets for example the EBRD that is doing a lot of work on that and when you hear how they work on the ground it's very difficult for a lot of say a financial institution in Morocco how do they get the data on the sustainability risks these are very expensive data at the moment for corporates to get the information and to kind of do the modelling for their own activities again it's something that they need to be supported so I don't think disclosure is just a straightforward answer like this it's important we get there but I think we need to think harder about how I think that's really really really profound actually I've been working on disclosure for too many years and I think sometimes there is a mood in the market that we can't take decisions until we have all the information all financial decisions are about the future which are inherently uncertain and I think we need to recognise better disclosure is good but actually we're going to work we're going to have to take decisions in uncertainty dealing with foreseeable risks and I think actually sometimes the focus on disclosure can make people delay action which obviously is not what we want to do so I think that's a wise comment Pierre a quick quick thought from you on the practical issues and then I'm going to turn to some of the people who've raised their hands and asked some questions just a quick remark on I think if you want to see I think a lot of the inaction from in terms of policy making also comes from a confusion that there is in the discussion I think people 10 and central bankers tends to mix like the risk management issue and a policy coherent issue I would say so there are propositions that are really about how to manage climate risk in their balance sheet in the financial sectors and there are propositions that say you should align your policy on broader objectives like climate change and I think for the second one I agree whether it's the central bank rule to do that or not there's a discussion about the mandate you know if you want to have like proactive measure in that direction I understand that there is a that there is a discussion and some reluctance to do that but on the risk management aspect I don't understand that it's yeah and and and there is no excuse not to not to not to start now because of course we don't have the perfect data but we have data I mean I've been working now with risk assessment climate risk assessment providers you have 10 of them that gives that give data and and it's not precise of course but you are I think in our situation you have to work with a precautionary principle it's it's better to use something that is a bit wrong than say we can use it and therefore we don't take this risk into account that is a mistake putting a zero risk on something on something that where we know there is a risk is a mistake it's better it's better to use in precise in in precise statistics that we are of course I agree with you Nick better data is always good but but until we have this better data there are steps to take that's right no I think that's that's that's very good particularly where we have market failures there's not this is not priced so very good so we have some some people asking questions that's great Adam Pauloff or Pauloff I don't know Adam if you want to unmute and ask your question and then I'll take it in turn I think Torsten I'd like you to ask your question verbally by voice it's always nice and I think we have Monica de Leo as well but if you if you want to unmute and ask Natasha if you need to help please do so so first over to you Adam yeah thanks a lot Nick and thanks to everyone really really interesting session this morning just a couple of brief comments and then a couple of questions I mean couldn't agree more with what both Dan and Pierre said said just a minute ago I mean we've been putting a lot of focus on on the issue of market neutrality as of late and also good to see our our report reflected in that and I think that is that argument is certainly beginning to gain some some traction where you just see how you know market failure particularly with regard fossil fuels is is quite prevalent in central banks balance sheets and maybe as an FYI we're going to be producing something quite similar in January on collateral frameworks so short the the questions would be on the one hand so Fiji was pointed out as one of as a central bank that has taken measures I'm wondering I've heard about Sweden and I know this is sort of only a light touch measure in terms of emissions intensity with regard to their corporate bond purchases whether that's been taken into account and also wondering on the priorities about differential capital requirements as as an issue thanks and I'm sorry if we didn't give you the chance to introduce yourself maybe to say where you're from sorry sure work for for Greenpeace and lead our work on the European Central Bank thanks so much and that's great so questions there on on on on Sweden and differential measures was that the second one yeah thanks so much and so Torsten Eilerts I don't know if you want to jump in with your your question or follow up yeah hi hi good morning and thanks this is a really really interesting work it's a great report I think this is this is something that that will be watched by central banks and others I think and it's I think it's good to have a list of things that you know central banks can do so my my question is one on prioritization so you have outlined this toolbox you know different tools available most central banks I think by now are aware of it but of course there are I do think there are capacity constraints and and perhaps that would call for prioritizing and perhaps concentrated on on some measures that we want to implement first so I was wondering how how you guys think about that thank you very good question thanks so much and then the last question from Monica de Leo Monica over to you please okay thanks very much so we're now closing in on the on the on the end of the session got a few minutes left so really ask the panelists to respond to those questions maybe sort of also wrap that up with your closing closing closing thoughts so I think the signal wasn't good unfortunately Monica with your things but I think particularly emerging economies I heard Adam's questions about Sweden and differential capital requirements and then there's a language of priorities in terms of capacity constraints constraints I'm gonna start going in reverse order so Pierre your your comments on these questions and final thoughts thank you and I'm just just a few a few comments on the Swedish the Riksbank I think what is interesting here is that the Riksbank started to introduce sustainability criteria in their own portfolio so not in their monetary policy portfolio and then came up with exclusion criteria I think they excluded some provinces in Canada and in Australia for for climate reasons so what is interesting is that it's not about not only about risk it's also a choice to exclude polluting and and what is interesting is that with covid they started an asset purchase program and and now they're thinking about or they announced that they will also integrate such a systematic consideration into their monetary policy portfolio so they started with with own portfolio which is something where central bank a lot of central bank do also use these kind of principles but then because of covid they started a monetary policy portfolio and then they extended their criteria to this monetary portfolio and it's I think to my knowledge it's the only bank that is not doing it yet but has announced that they will have such criteria which is interesting just for for dorsion in terms of priorities for me I think you guessed it is to introduce climate risk to reflect climate risk in monetary policy operation whether collateral or refinancing or refinancing facilities and to reflect this risk and also in inclusion regulation. Lovely I think I think that progression you identified in the Riksbank is really an interesting example sort of learning by doing I think it's a very very very good example thanks so much Danai your your closing thoughts thank you. Thanks Nick really good questions I think on the priorities actually it's the key policy that we need is not up to central banks it's up to governments it's carbon tax carbon pricing I think that should be number one in terms of what central banks can do I agree with with care I think it should be emphasizing the risk motivation for them to do something and and while they acknowledge that they're not properly pricing risk they should do something about that so that's what I would say on Monika's question I thought that's a really good question because we are seeing central banks change as an institution because of this crisis and I think it's also interesting to compare previous crisis I think what we saw in the previous crisis was that they became much more in the they came much more in the public eye central bankers are now celebrities their household names they're no longer these technocrats that would tweak interest rates and kind of no one even knew about it or didn't affect people's everyday lives everyday lives and I think that's being intensified even more now so asset banks become more active and the good thing that's along the only game in town as they were in previous crisis because we're seeing fiscal policy move as well but I think the links between fiscal policy government debt management and central banking are becoming more close and you're now starting to hear all these fears about fiscal dominance and public debt is high and central banks are in a trap and I think all that discussion about central banks becoming more political will also influence how they will approach climate change and I think that's partly perhaps why they're being so cautious I think it's very very important that they are rigorous about this risk distinction and the alignment motivation with government policy and I think that's how they should approach it going forward. Can I thanks so much thanks for picking up on Monika's question so Irene apparently you're a celebrity now according to Dan, I hear your comments. Yeah I never thought I would be as a central banker but that's I think in a way it's a positive thing and I think we have to live up to the expectations so that's and therefore I want to thank everyone you know for motivating central banks and supervisors to move forward on this team because if we would do it only by ourselves we wouldn't move so fast so thanks so much for being like pushing us on this topic and motivating us and I totally agree with what Pierre said and also Dania that it's the risk angle we should be looking at and we've been quite focused on that angle and we try to emphasize that and of course we need more information and data and disclosures but still we can do a lot and let's see what we can do more on disclosures I agree it only covers of course a bit not the whole market but let's it's an important part from the developed economies to work on that. Yeah finally I think for the priorities I would say let's let's look at the market neutrality more in detail and the monetary policy side I think for the prudential requirements there is work ongoing also at the European banking authority and all other authorities are looking into that but I think the monetary policy market neutrality side is a bit more unexplored still or that's where the biggest steps still need to be taken. Yeah and I think that's fine and just a plug I think Pierre is too modest but Pierre and his colleague did a very good analysis of market neutrality more broadly within monetary policy and obviously with application here to green policies so have a look at that and it's an excellent piece. We're coming up against time but I'd like to have a brief word Uli and Simon from you particularly in terms of what's going to happen next in terms of Inspire and the toolbox so Uli and then Simon. Thank you and thanks everyone for really excellent comments and remarks and I wish we had an extra hour now so I think the single most important thing that central banks and supervisors can do right now is really set out a clear pathway about kind of that will guide the financial sector so making clear that climate-related disclosures will become mandatory and explicitly for large actors so that all financial institutions will have to disclose climate-related financial risks and kind of companies of a certain size or listed companies and of course SMEs sense a different story so the disclosure I think that's a no-brainer and as I said in the chat I do think stress testing also needs to become mandatory you know there's different degrees of sophistication you can add to that but and companies don't need to start or firm financial firms don't need to start immediately but central banks can give a little bit of notice but just this announcement will already have an impact so I think these are two really low-hanging fruits I mean we have a lot of other different tools and obviously in each jurisdiction you know the physical and transition risks are different and you know kind of the the traditions and approaches by different institutions also differ I mean we've haven't really touched on developing emerging economies but you know many have financial systems that are very very different from what we have in Europe and the consequence the policies that will be best suited will also differ but so my main point is really giving some kind of forward guidance in a climate risk-related or kind of broader sustainability-related sense obviously by diversity becoming a really big issue now and rightly so and just before I hand over for Simon for final comments we will have a second launch of the toolbox for an Asian context with Marjoon who's leading the NGFS research stream on research and our partners at the CSEM center in Kuala Lumpur and that's going to be on 15th of December 8 to 10 CET but you'll have the announcement soon thanks a lot everyone thanks Ali and yeah look forward to hopefully some of you joining that so that's going to be a really great session so Simon maybe just a quick thumbnail sketch of what inspire plans do next yeah yeah I think Ali summarized the priorities very well in terms of next steps so we will we will do further research on this and we will now get into the technical details of some of the proposed instruments and this is also why this discussion here today was was very helpful and and all of the panelists comments and Torsten's comments on on priorities so this is what we will think a lot about what what can be the priority a lot of research inspire has already commissioned for example on collectible frameworks there's a project ongoing on on asset purchase programs there are I think one or two maybe even three projects ongoing so there's a lot already happening within the inspire network and we will see how to strategically expand this to make sure that the the technical details that are needed on some of these instruments are provided that's that's fantastic so stay tuned for that and I'd like to respond Monica also to your question in terms of how how this crisis could reframe the way we look at climate and other sustainability issues when Mark Campana and I set up carbon tracker we did that after the global financial crisis and before the global financial crisis we could not conceive could not imagine that climate change was a systemic risk for the financial system because we thought that the financial system was stable and tended towards equilibrium and I think COVID will likewise reframe the way we look at these issues I think particularly the speed and disruption of shocks as we've heard today but I think also the wider social implications of of of of transitions and so on and so themes around questions around just transition will also come up but I think it's not going to be a normal process and it's going to be our way we deal with climate change and sustainability in the way the central bank's operate is going to be I think quite new in the years ahead so thank you all for joining thanks to our fantastic panelists, celebrities, experts and everyone and look forward to seeing you perhaps on the Asia session on the 15th Centre so thanks very much everyone and have a good day thank you.