 Thank you very much for joining us today for the Civil Society seminar dedicated to the ECB's role in tackling climate change. Civil society has always been a key player in raising awareness and mobilizing action to combat climate change. Many of our participants closely follow the policies and work of global and European actors in this field. Over the recent months, many of you have been reaching out to the ECB to raise concerns about the climate emergency. Your keen interest and expertise in this topic prompted us to organize this seminar today and present the ECB work on climate change. I'm joined today by Frank Eldersen, member of the ECB's Executive Board and Irena Hemske, who is the head of the ECB's Climate Change Center. We will start with a brief introduction by Frank, who is of course also a member of the ECB's Governing Council and can shed some light on the considerations of climate change issue in this forum, and then Irena will present the work of her and her colleagues who are coordinating all the climate-related work at the ECB. Their work has indeed intensified six months ago in the aftermath of the Strategy Review. We will then leave ample time for questions and comments from our participants, and we very much encourage you not only to ask but also to share your views with us as we want to be in the dialogue and listening mode in this event as well. A little bit of housekeeping before we start. If you have any technical problems in the meantime, please chat with all panelists. As stated in the invitation, this seminar is being recorded and a video will be published on the ECB's website afterwards. Without further ado, Frank, the floor is yours. Well, thank you very much, Victor, and thank all of you for joining us here today in this webinar, and I'm delighted to speak with you, and especially also to listen to you on what I consider and I think all of us consider a fundamentally important issue. Now, I greatly value the work of organizations like yours, and the actions many of you are taking to make sure that the urgency of climate change is properly acknowledged and addressed. Constructive dialogue and exchanges of views are always beneficial when tackling complex issues that affect all of us. And I am sure that you are all aware, we are all aware that the Earth is now already about one degree Celsius hotter than it was in the 1800s, and the past seven years have been the hottest on record. The intergovernmental panel on climate change estimates that global warming of two degrees Celsius compared to the pre-industrial area will likely be exceeded during the 21st century unless deep reductions in greenhouse gas emissions occur in the coming decades. Leave alone one and a half degrees Celsius. This has already led to more frequent and extreme weather events and natural disasters, and the cascade of dramatic weather events all over the globe during the past year has demonstrated in a most striking way that the consequences of the climate crisis are not just a long-term underlying threat, but they are materializing here and now, and with ever greater frequency. The effects of climate change are therefore happening now and will worsen to catastrophic levels unless we act decisively to tackle them. These extreme weather events offer painful reminders that we must act urgently and jointly to address the climate and environmental crises that is upon us. In this regard, the good news is that urgent climate action has finally become a policy priority in many jurisdictions, and there are now signs that policy action to fight climate change is accelerating, especially in Europe. We are seeing a new political willingness among regulators and fiscal authorities to speed up the transition to a carbon neutral economy on the back of substantial technological advances in the private sector. Yet, in order to achieve this goal, our economy must urgently undergo profound structural changes. Ambitious action is still needed to make sure that our economy is pair-is-aligned and time is running out. Now, governments and parliaments have the primary responsibility to mitigate the effects of climate change because they have the most appropriate toolbox to do so. Monetary policy and banking supervision cannot be a substitute for ambitious and decisive fiscal and regulatory action. Nevertheless, although, as I just said, monetary policy and banking supervision cannot be a substitute, we all do have the duty to do our part and ask ourselves how we can contribute to fight against climate change and to act decisively now within our mandates. This is a task for all of us, including the ECB. Again, within our mandate, central bankers and supervisors have a key role to play. And let me explain this in somewhat more detail. Firstly, according to the EU treaty, the ECB has the primary objective of keeping prices stable. And there is clear evidence now that climate change affects price stability in several ways, so the ECB must take it into account in order to fulfill its objective and comply with EU law. First, it affects the way that our economy functions, both directly through extreme weather events and environmental degradation, and indirectly through the policies put in place to address climate change. We need to better understand these implications so that we can account for them in our economic analysis, in our risk assessment, in monetary policy and in banking supervision. Second, climate change comes with risks. A changing climate and related policies will affect some industries and regions more than others, leading to a change in the value and riskiness of the assets that we hold in our balance sheet. This means that we need to adapt our risk management framework accordingly. Secondly, the EU treaty also mandates that the ECB shell through its policies support the general economic policies of the Union without prejudice to the objective of price stability. And since EU policies give high priority to addressing climate change, the ECB has a duty to reflect on how it can support these policies and then to actually do so, without prejudice again to its primary price stability objective. Thirdly, since 2014 and according to the SSM regulation, the ECB also has the mandate to supervise the European banking system in order to contribute to the overall safety and soundness of the banking system and financial stability. And it is our responsibility to ensure that banks are resilient, are resilient enough and well-equipped to properly identify, manage and disclose risks, including those stemming from climate change. Hence, it is clear by incorporating climate change considerations in our work, we are acting in the pursuit of, not in spite of, our mandates. This is our duty, not an option. However, let me re-emphasize, the ECB is not a policymaker in the area of climate mitigation. This means that we are not in charge of making climate policies ourselves, but we pay close attention to the adoption and implementation of the respective legislation and build on the policies and initiatives that are being pursued by the EU. Climate change has clear macroeconomic and financial implications and has consequences for our primary objective of priceability, as I said. And as such, the ECB governing council is firmly committed to address these consequences within its mandate and publish last July an action plan to include climate change considerations in its monetary policy strategy. But also for other areas of the ECB's competence, financial stability and banking supervision, climate change is of key relevance. In particular, the ECB has systematically and consistently been integrating climate and environmental considerations into our activities. Monetary policy, banking supervision, the management of non-monetary policy-related balance sheet and the conduct of all our own operational tasks. And this includes incorporating climate change considerations into our monetary policy, financial risk assessment, expanding our analytical capacity to assess the effects and risks of climate change and implementing our climate action plan in line with the EU policies in environmental sustainability disclosure and reporting. On the banking supervision side, this also includes supervisory climate risk stress testing, reviewing bank strategies and governance and risk management frameworks and conducting appropriate follow-up on banks' disclosure practices and their adherence to our supervisory expectations, including those on managing climate-related and environmental risks. We are also regularly and actively contributing to discussions in the EU and in global fora on managing climate risks, the financial impact of climate change policies and climate-related standards for financial products. We are an active member of the Central Banks and Supervisors Network for Greening the Financial System, the NGFS, which has grown from eight to 105 members since its establishment four years ago. My colleague, Irene Heimskerk, who leads the recently, not so recently actually now, established ECB Climate Change Center will now say more on the actions of our climate agenda as well as on the mission and the functions of the center. So, let me conclude by emphasizing that the ECB fully recognizes the urgency of tackling climate change and is firmly committed to tackling it within its mandate. Now, let me thank you once again for your participation and I'm very much looking forward to the conversation we are about to have with all of you today because let me end this introduction by very candidly saying the following. Despite all the efforts of the last years by the central banking and supervisory community, we don't have all the answers and I therefore consider this dialogue not as some nice to have but as a need to have. Your ideas and your suggestions, your questions, your criticism, your support are all key to further this progress and such urgent further progress is all too necessary in face of the greatest challenge of our times. Thank you, Irene. Thank you very much, Frank. We will now indeed turn to Irene Hemskeck, the head of the ECB Climate Change Center to present the work of her team. Irene, if you're ready, the floor is yours. Yes, I am. I'm very pleased to meet you today. Actually, I've joined the ECB in last June and it's been on my list to talk to you since then and this is the weeks of New Year's resolutions. I think I'm fulfilling my first one now with you and I'm just very pleased to tell you a bit about the work of the ECB on climate change and what the role of the center is. So I'm covering three topics with you today. First of all, well, our climate change activities just getting a bit more in detail than what Frank already told. What are roles at the ECB Climate Change Center, what we're doing with my colleagues and also some challenges and other considerations at this front. So I've looked at the list of participants and it's quite a diverse group. For some of you this might be nothing new and you can spell the mandate even if I wake you up at night. For others, it might be a good to really to just start and sketch a bit the tasks we're doing, the different activities and objectives we have for climate change in the activities we do for the economy and also the financial sector at large because of course we have other mandates as well as bank notes but I'm leaving that out for the moment but really focusing on how do we operate in the economy at large and what are objectives on climate change. So first of all, it's economic analysis. So our objective there is really to ensure that climate change and mitigation policies are accounted for in our macroeconomic models, staff projections and risk assessment and we will assess their impact on monetary policy transmissions. On the monetary policy side we're really including climate change considerations in our monetary policy operations. That is our objectives in the areas of disclosure, risk assessment, collateral framework and also our corporate asset purchases. We are there just looking really what can we do. But Frank said we're also very reactive on the banking supervision side. What we dare want to, our objective there is really to ensure that supervised institutions proactively incorporate climate related and environmental risk into their business strategies, their governance, risk management and in order to mitigate and also disclose these risks. For the financial stability side it's really we we're focusing on identifying measuring and assessing risk posed to the financial system by climate change also to inform the public debate, market participants and policy makers at this front. So this is what we try to achieve. Let me now dive into a bit more detail what we on some highlights that have happened since last June as once I joined both Victor and Frank already mentioned the climate roadmap out of there was a monetary policy strategy review on July 8th we published climate roadmap and it really entails nine actions that we're taking from 2021 up to 2024 with clear milestones in between. So this is the activities we're all taking in place and jointly with your system National Central Bank. On the financial stability side in September we published our economy-wide climate stress test. We included data for over millions of companies and a lot of and also from banks and for us it was really important to see the results because it showed that the short-term costs of the green transition are compensated by its long-term benefits. In simple words we better act now and take and move forward on a clear transition path and get our economy moving because time is running out and if we don't act the bill will only increase getting nearing the future and that leaves the bill with our children, right? For banking supervision in 2022 already we published a guide with supervisory expectations what do we expect from banks to managing climate-related and environmental risk. This really we were transparent on what are the expectations we are having towards you on towards you banks to move forward on this team. Over the past year on 2021 there wasn't banks executed the self-assessment and this assessment showed that banks although I have to say like a lot of them are really moving up on this but still most banks do not meet these expectations so there's a job to do on that front as well. The last highlight I'm just really pleased that the ECB launched this climate change center because I will show you later the activities are taking place on climate change all around the ECB and it's just so good to give this most very important topic a home to make it and really I'm there to push forward the team as much as I can. So this is looking back on the past half year looking forward what is coming up in 2022 well I've highlighted here some actions that are in the climate roadmap coming out of the monetary policy strategy review for this year we have the macroeconomic projections so we really we are introducing assumptions on carbon pricing and evaluating the impact on climate related fiscal policies on the corporate sector asset purchases we are developing proposals to adapt the CSPP the corporate sector asset purchase program framework to include climate change considerations this is what we're doing we're developing at the first half of 2022 and then moving forward the rest to really make the adaptations needed that comes out of that work for the Euro system balance sheet we're executing a pilot climate stress test last year we were already collecting the data developing the methodology and now we're executing this year for the collateral framework we're reviewing valuation and risk controls to ensure that climate change risk are reflected in our collateral framework and assessing financial innovation related to environmental sustainability for disclosure we are designing the operational and legal preparations to introduce disclosure requirements for private sector asset purchases private sector assets in the collateral framework and asset purchases helped to have it ready by the end of 2022 and the last point here I think this is also very important to emphasize statistical data every debate I've participated in for the past year since I've been working on this topic everybody's talking about data and I think data is a very important element for us to make us possible to measure risks and to really ground our analysis on this so what we're developing on this front is indicators on green financial instruments portfolio exposures or financial institutions to physical and fiscal risk and carbon footprint so that's also the transition risk inside and also so that's what we're doing on the data front that's a long list already that's only the climate roadmap activities for the financial stability we're improving and regular assessing our exposures of our financial system to climate related risk with this we're really building on the experience we've gained on the executing this economy-wide climate stress test last year on banking supervision I think Frank already mentioned it and also what I said what we just published in December like what is the state of play currently with banks on applying our supervisory expectations for our day next year we're building up on this so we're completing our supervisory climate stress test I think this is a very key milestone to do this is what we're planning the coming year to do a thematic review of banks' climate strategies and governance and risk management frameworks onsite inspections that means that supervisors really go onsite COVID restrictions permitting but see what banks are doing at this front and then follow up by joint supervisory teams this means that like the ECB works with the national supervisory authorities with all the banks that are operating in the different countries of the EU to see on their disclosure practices and their adherence to supervisor expectations laid down in the ECB guide with the supervisor expectations on climate related and environmental risk and we also will feedback to banks on risk disclosures I expect we publish something in the coming months on disclosures as well in this regard so this is a big to-do list for the coming year and I think this is a good bridge to go to the ECB climate change centre to give you a bit of insights on the work we're doing at that front so our main functions is steer the ECB climate change strategy so there was a climate roadmap that we were looking at so we're really aligning priorities objectives and processes across business areas so everything what's happening within the ECB how are we doing that well first of all we're really connecting people we have a very clear view who's working on what within the ECB and make sure that people talk to each other and share the information we really facilitate where that's front and also inform to achieve the work within the ECB but also beyond so really trying to improve our transparency on this front and also I think this dialogue with you today is a good example although I really hope this is going to be a two-way street because I'm always curious to learn from you thirdly coordinating so we're really coordinating climate change work and identify anything that is relevant we are supporting key stakeholders in implementing climate change strategy with the ECB and beyond to give you a bit of insight on like under the hood of this machine how we work so I've dropped the word business area a couple of times well that means like units within the ECB that are working on specific topics on the right of this slide you see all the business areas so we're closely related to them and how it works that we have like six people seconded to the climate change center that are coming from this business area so they're really with the liaison function that we know what's happening there and they know what's happening at the ECB white so we have a financial stability and prudential policy work stream, financial market operation and risk EU policy and financial regulation and I come to this later because I think this is a very important development as well I think where Frank alluded to that maybe we're not well we are not the policy maker on climate mitigation but we do participate in a lot of debates on this front we have the macroeconomic analysis and the monetary policy and of course data and also our corporate sustainability because we have to practice what we preach and we want to practice what we preach and this is I have a short slide on that as well to give you some insight on that because of course as a corporate we're also looking on what can we do to improve our action on climate and reduce our environmental footprint so there's one work stream on corporate sustainability this is led by a Green ECB team so it's really an internal team to move forward on this we're having several focus areas there mentioned on this slide but just to mention the last the few that are mentioned on the bottom what we already achieved at this front is a 37% reduction of our carbon footprint between 2008 and 2019 well going 2050 of course it should be reduced to zero but this is the path we're really on and also alignment of ECB's emissions reductions with the Paris Agreement so this is really how are we going to achieve net zero there so this is a bit the work that I'm doing I feel I'm there really there to steer the ECB work and make everybody able to deliver upon our expectations and the expectations and push it as far as possible the other slides the last two slides I want to bring to your attention is some challenges and considerations because it's important to also sketch we're not working in a silo what I've shown you the work we're doing within the Climate Change Centre it's a lot of this internal focus but we're living in a big ecosystem at this front there are three challenges and considerations at this front that I want to share with you first of all the complexity of foreseen actions like all we are doing we really want to ground our actions with thorough analysis and this requires sometimes time and major leaps in availability and quality of climate change related data and modelling techniques this requires time we try to push it back as much as possible but we do need to have we need to really base ourselves on thorough analysis the policy making process well that's the same like the ECB here our home in Frankfurt we're working closely with a lot of banks in the euro system so we really have to ensure also that our measures what we're doing are legitimate and we also work with all the NCB's at this front so our actions are accounted for with many stakeholders the last challenge I want to mention here is the progress in EU regulation so governments and parliaments remain the primary actors in addressing climate change and they have the widest toolbox to address it so our success hinges on regulatory process for example on defining clear transition path on taxonomy and data and disclosure requirements a lot of if we really want to have insights on the risk we need to have insight of not only the financial institutions but also the companies they are invested in so the whole ecosystem we're working in at this front this is the this is the last slide I want to share with you that also shows the broader context we're operating in Frank already mentioned it like we're part of we're participating in a lot of debates within the EU we're part of the EU technical expert group on sustainable finance we're taking of course we're part of the EBA's work on sustainable finance we're following the AFRAC work very closely we're a member of the financial stability board the OECD the G7 the G20 the Basel committee on banking supervision and the NGFS so within the NGFS we're a member of the steering committee so we're really closely involved in that work and I think this is also very much needed and to speak also from a personal experience what the NGFS has brought I think all the members so far is you have to learn from each other and the work that we are searching on what can we do on banking supervision what can we do on our monetary policy operation to share this together and to do this journey together with your peers it's been very instrumental that's my observation to accelerate the work that every central bank and supervisor is undertaking at this front around the world and then I come to the conclusion and because I'm just very much looking forward to hearing from you as a starting point with the dialogue with you on this topic and I really foresee that we have this more often and please share your thoughts because we very much need your ideas as well to move forward on this theme. Thank you so much Thank you very much Iren and also thank you Frank again I'm sure by now our participants have many comments and questions that they would like to share with us. If you would like to speak please raise your electronic hand you should see an instruction slide now. Once we see your hand we will call your name and my colleagues will connect you to the panel please bear with us as it may take a moment or two you will be automatically unmuted and we encourage you to turn on your camera and briefly introduce yourself please remember to lower your hand after asking your questions and in case you are experiencing any technical issues please contact all panelists in the chat. Once again if you would like to speak please raise your electronic hand. I see Stan Rodin would like to take the floor so Stan please bear with us we will connect you in a second and if you would like to start your video please do so as well. Stan the floor is yours. Yes Hello and thank you very much for organizing this webinar and thank you very much. I would like to react to a recent speech by your colleague Isabelle Schnabel because I think she made a very groundbreaking point on the implication of the current rise of energy prices that we have seen in recent months and what some are calling green inflation even though I don't really like the world because I think it's kind of misleading to say that it's climate's fault so anyway I think Isabelle is right energy prices and it's becoming a possible scenario that this will continue for the coming decade so if so I certainly agree with her that the ECB will have to react to it to some degree but how because if the ECB were to raise interest rate because inflation and energy prices are going up too much this would also have the effect of making green investment more costly and we know that for example in investment in renewables in the future are more capital intensive and therefore the rise of interest rate will hurt them even more than let's say fossil fuel companies which investment already been 8 or 4 years ago so what I mean by that is that basically if the ECB just uses a traditional approach to manage policy and simply tighten policy in a brand way as the ECB usually does it basically make the transition more costly than it already is so what do you think about that and can the ECB afford to do that and would that be a violation of your second mandate if you were to both fight in a way that also slows down the pace of the transition and therefore don't you have an obligation to look at third ways at different approaches such as what has been proposed for many people to talk about the sort of dual interest rate approach to manage policy and in particular to the refinancing operation and in that way you could actually both tighten policy in certain areas while supporting an affordable cost for renewable energies or other type of investment that will improve price stability on energy prices such as innovation so thank you very much thank you very much Stan again guys if you would like to speak raise any issues please raise your electronic hands I have a feeling that I would like to ask Frank here and I don't know if that's your feeling as well Frank well thank you Stan for your question obviously very important and complicated now let me maybe say this at the start many people see or frame this as if there were to be a very big dilemmas if you know on the one hand we have this price stability mandate and on the other hand but I I'd rather not look at it that way what I would say is as I've said before we have to act within our mandate that is clear but we now understand and that is I think clearly different from from 5, 10 years ago certainly longer some people of course they might have seen this earlier but in mainstream central bank thinking what we have learned is that you cannot think about the functioning of the economy that you cannot think about inflation price stability financial stability a sound banking system without incorporating what we now know in terms of climate change both on the physical risk manifestations of climate change and environmental creation on the one hand but also on the transition risk on the other so we know that we have to take this important now I think what my and of course I don't want to speak for my colleagues but the way I understand her speech is that it says that looking backwards central banks traditionally and have looked at energy prices as rather volatile they go up they go down and of course our monetary policy has a medium term focus so to a certain extent what we do of course we follow this all very closely but we also looking at the medium term we look through this very short term volatility now it might be it might very well be that the energy transition that we're going through will indeed have effects that are more long lasting and less volatile in the sense that they just go up and go down they might well if that is the case and if that were to lead to and there's a lot of conditions here that's why I say if this were to lead not just to a one-off increase but something that would be increasing and then increase again and increase again it would actually lead to inflation that is higher than our target then we would have to act under our mandate and that is what it actually means if we say that we have a price stability primary objective now maybe to maybe use this moment to say and because we might be focusing a lot on monetary policy but don't underestimate and even if people who now participate have not prepared for that I will just kind of challenge you and come back to us at a later stage don't underestimate also the importance of banking supervision in changing the entire financial system towards Paris alignment I don't know I haven't seen maybe some of you have seen or your thoughts about that would be interested but you could actually see what in the end will make the bigger difference but don't underestimate what it means if you tell all the banks under our supervision that they need to really integrate Paris alignment in all that do because the only way that they can do this is engaging with their clients making sure that their clients do as well and their clients are the entire real economy aren't they so I don't want to walk away so everything you have to say about monetary policy please give it to us but don't forget to also challenge us on supervision because we do a lot of things there but maybe also there we can do more and in the end it might be very effective thank you very much Frank thank you Stan again again if you would like to speak please raise your electronic hand and once we see your hand we will call your name and then my colleagues will connect you the next electronic hand comes from Maurizio Vargas Maurizio if you hear us please bear with us we will connect you now and unmute you and we will turn on your camera if you wish Maurizio try to maybe reconnect your audio again but in the meantime we would go to Adua Dalla Costa Adua if you with us please bear with us a second we will try to we will try to put you through and also encourage you to turn on your camera if you wish Adua the floor is yours hi good afternoon I have two questions actually and I hope I can take the floor later maybe after everyone has spoken but the first one would be on data on environmental risks so we know that these kind of data are poses many challenges together and we really appreciate the work that ECB is doing towards that but at the same time we know that environmental risks are characterised by radical uncertainty which makes them pretty much predict and calculate so based on these I have two questions and one would be what strategies are available to the ECB to act on the data already available and the second one would be if you see a way to make some decisions despite the fact that data will be incomplete for instance whether the ECB has considered at all applying the precautionary principle to overcome these limitations thank you thank you very much would you like to start I didn't hear the question we didn't hear that but I think Frank was taking notes so maybe then Frank starts I think I understood you Arvind so thanks for your question if I answer some different questions then you can drop me and just tell me to stop and I'll try to do as well so if I understood you correctly what you say which is very true that we are looking at a very imperfect data set aren't we as mankind maybe even in terms of environmental risks so if you were magicians we would know it all perfectly but we don't so what does that mean how do we deal with that are there ways to address that but I think that what we have decided very clearly and let me now focus on banking supervision for this part of the question is that we are not going to wait until the world is perfect because we cannot the matter is too urgent risks don't go away because we don't have data you could even argue that because of the lack of data the risks are even bigger because you know you might be surprised because you don't see it coming and you might then use I think but this is just on the basis which you just said that the precautionary principle which of course is a legal concept which is there actually under the lines why it is important that we don't just wait until the world is perfect so what are we doing we use scenarios so we don't know exactly what's going to happen but in our stress testing using by the way scenarios that have been developed under the ages of the NGFS because we feel it's important that we have worldwide comparability so we try to use scenarios that are also being used by other supervisors around the world so that we can compare and we ask the banks one to work with the data that they do have and two to then use proxies where they don't but we want them to grow there so we don't wait so the micro stress the micro bottom up stress test that we are doing this year which visits all the banks are under direct supervision we require banks to run these scenarios we put pressure on them to use the data that they have and this will, we hope, set in motion a pressure by the banks on their clients to actually provide them with the data that we don't have or that are not big so we talk about this as a learning exercise it is because we haven't done so so far it's a very big exercise many of the banks are actually complaining which I understand so I hear it but I don't listen to it in the sense that of course we have to be we have to be fair and we have to be proportional but we do say we cannot afford to wait until the world is perfect as I said so that I think is how we deal with this and maybe you can extrapolate this wider there is much more data out there now than there was five years ago this is growing, the international databases that are there, the private actors that are there, NGOs there are many, many places where the data can be found that some banks actually do use and some others don't and that is maybe also another aspect of what we can do in our supervision what we do is that we say we give back to the banks what we see we can look in the cuisine in the kitchen of all these banks banks cannot look in each other's kitchen and we challenge them, we say okay you say you don't have the data but some others do and they get it from these sources and then we try to speed up the whole thing horizontally thank you very much Frank yes please Serena absolutely, yes because talking about data I think it's also important that we're looking also what kind of data can we collect ourselves right as the ECB so we recently got involved with the NFD so that transfers from natural financial disclosures so there we're also learning from there what are they doing at that front what are the developments there and also looking broader on the data that we can acquire ourselves for our work we have a big procurement going on at the moment hopefully that we will have a new data sets in the first quarter that could feed our information ourselves thank you very much Irene and Frank shall we try to connect to Maurizio Vargas again thanks again for taking the floor and let's hope we can now connect to Maurizio Vargas Greenpeace International Maurizio let's try again it looks good but somehow we still don't hear you maybe Maurizio you can just put your questions in the chat or maybe we read them out for everyone and then we will try to we're really sorry for that it looks from our side that your mic is on and we see you that's the most funny part but somehow we cannot hear you I'm really sorry for that maybe try to disconnect from the seminar and connect again we'll get back to you at one stage we're really sorry for that Maurizio but we're happy to have you with us and please do reach out to us through the chat if we cannot connect otherwise and in the meantime please raise hand with Julia Simon Julia please bear with us we will try to connect you if you'd like to turn on your camera please also do that and yeah the floor is yours Julia I hope you can hear and see me well yes we do hello good afternoon and thanks a lot for the insightful presentations and I'll also revert to the topic of supervision I guess maybe just a brief comment I would say I represent finance watch by the way sorry for not mentioning that so we are very much with you on the aspects of urgency of addressing the risk and also on the challenges that you've outlined with respect to the data and advancing on modeling and also with respect to the actions that are being undertaken to address the problem as Frank has just underlined the stress testing however I think our kind of concern a lot of that action is still building the understanding and exploration and whereas on the other hand we have this tension with the urgency of addressing the problem right so at finance watch we've been advocating for pillar one capital requirements to address climate related financial risks specifically for the fossil fuel exposures which are kind of in the focus of attention of the climate science but I very well know that this is outside of the remit of the ECB so I'll have kind of questions which are more related of course to what ECB is doing or can do namely kind of 12 fold first on the stress test like looking into the upcoming bottom up stress test which ECB will be doing should we expect or are you planning to also review the capital adequacy of the banks in the view of the risks which will be uncovered or explored so is that something that we can expect this year or if not then when in terms of like enacting an impactful action and the other question sorry if not exactly related is on the macro prudential framework so as we know there is a call from the European Commission to the supervisors including the ECB to provide an opinion on the adequacy of the current macro prudential framework to capture the climate risk and financial stability aspects of the climate risk so the question is which analysis or which work ECB planning or undertaking to answer to that call for evidence and if there are any views already on this with respect to if the macro prudential tools are fine or if we need any adjustments specifically for the climate risk thank you thank you very much Julia how would we want to divide that Frank starts yes with the stress test thanks a lot for your questions and I understand that you are also asking about pillar one and capital requirements more in general it is true of course that bankers pay attention to all we do but they is my experience specific attention if one starts talking about capital requirements so it is only logical that the issue comes up let me maybe say this a little bit with my one of my other heads I must be transparent here on as co-chair of the task force on climate related risk which we pour into the Basel committee the Basel committee is looking at the entirety of the Basel accord this is public knowledge looking at all three pillars including pillar one you know that that always takes time but serious work is being done also in these quarters as to how we now have presented the stress test I think you are right there is this tension isn't there and you know if you read the reports of the club of Rome in the 1970s we are not a little bit too late we are decades too late in the work that we are doing so every activity we take that takes a year or two without really addressing the issue as we might all like seems like another one or two years lost on the one hand on the other hand it is true that these things are really complicated so there is you know even for those who want to run as fast as possible it is just the case that there is a need to really learn how to do this so we have never done this the banks have never done this we have never done it at a bottom up climate stress test the scenarios that we use are still novel we want the banks to be forthcoming and open to us and learn and I mean there are all kinds of metaphors maybe I shouldn't be using those but you know fully well if you teach children as well if you create a little bit of a safe environment you know it is earlier it is easier to learn from your fault so we present this and it is as a learning exercise but I always in the same sentence now not a period I always say but we better learn fast that is the way I look at it what we say is therefore that this exercise in and of itself is not geared towards having quantitative consequences this is a qualitative learning exercise what we do say is that we do not exclude that in an indirect way because of the scores if governance or other scores that go into the threat process are being affected because of egregious processes that we see or a complete lack of progress then the scores might be affected and that might then have an indirect effect on capital you said if not now when it will come that is I think what I can say now the Basel committee has already said publicly that actually climate related and environmental risks are a source of financial risk we have said also as an NGFS for many years as you know and it fits into the existing risk categories in credit risk in operational risk, in reputational risk, in legal risk and we know how to deal with those so if these risks are there we can also act on that and now again as always spoken maybe a little too much so maybe if you take the second part on the macro system I think it was the opinion on the macro prudential framework and on how is it fitting the climate risks there I can say that we are working on it of course I cannot tell much about on our preliminary conclusions or ideas about this but here again like we're working on it so if you have any ideas or brilliant thoughts that you can share with us how we could take things into account please do because we everything you write to us or send to us we re-read it and we can see what we can do so very welcome an invite to you thank you very much thank you as well for the question I see we've received a question from Mauricio Vargas so let's maybe turn to that in the climate action plan you stated that the ECB would like to conduct enhanced due diligence to incorporate climate change risks and in the legal case in Belgium you stated the ECB has already started to take relevant climate change risks into account in its due diligence procedures it's corporate sector asset purchases in its monetary policy portfolios can you elaborate what kind of concrete changes have happened so far Irana thank you Victor and thanks for being the voice over for Mauricio happy to we cannot hear him indeed we have said that we are already taking climate risk into account in our due diligence with our corporate sector asset purchases the only thing I can say here is that if we detect anything like with any due diligence if you see something you act on it and then you take the whole the whole asset into account so that's what I can say I cannot say like what concrete actions we have taken but please know that if we of course if this leads to something we act upon it so that's my short answer thank you very much and let's hope we can come back to our participants those raising their electronic hands once again if you would like to speak please raise your electronic hand and we'll be with you shortly I see the hand from Roger Cassell Roger if you bet with us for a second we will connect you encourage you also to turn on your camera and the floor is yours thank you very much indeed I'm Roger Cassell the president of your peoples forum thank you Frank for saying that a structured dialogue with civil society and through civil society with citizens is not only nice to have I think you said it was a need to have as a citizen I don't have the next brilliant idea on climate change to offer but I do know citizens who do and I do want to share my conviction with you that if we are patient and we speak to enough citizens for long enough with a clear methodology that it is a mind field for excellent new ideas for how we can combat climate change but of course that's probably conviction that we all share in this room but the key question and my question to you is how do we actually structure that dialogue how the European Union's answer to that is called the conference on the future of Europe become a permanent mechanism for citizens consultation but how does the ECB think that that dialogue with citizens can be structured what is the ECB doing to encourage other banks to engage in more deliberative methods of engaging with citizens because that's really in the end we all think it's a great idea it's a great idea to do that but how do we do it in an effective way with an effective methodology and just very briefly to ask Irani thank you very much for her comments and she said about her New Year's resolution I'm delighted that our conversation with us is fulfilling her first New Year's resolution I wonder what her second year's resolution might be in particular I think the New Year's resolution is that we resolve to change our behaviour and while it's true governments and parliaments have their toolboxes and their policy toolboxes the effectiveness and impact of those policies often depends on the extent to which we can change people's behaviour not just through their New Year's resolutions but in other ways as well and we might reflect on what is happening at the moment in the face of the global pandemic I hope that some people's New Year's resolutions will be to get vaccinated they haven't done so already but we do rely on being able to change people's behaviour, citizens' behaviour and how do we do that and how important is dialogue and involvement and engagement of citizens in achieving that end and what would be your reflections on that in the context of climate change thank you very much thank you Roger, should we start with resolutions or let's not start with resolutions I can say something what I think is really important is that all the news that we are receiving on wildfires on on floods on droughts they're pretty scary and it's not often that you think, oh that's a future I want to live in so if you're thinking about behaviours I think it's really important that together we're going to build a story on a future where we want to be and now we're focusing, okay we can do a lot of things less but we're not focusing on we're getting back clean air and a future for our children I think there it's really important to start telling the story that way instead of only focusing on the scary part because it's a scary future and I think even in these pandemic times people need perspective and also at this part and hopefully this will also be like a trigger what is really the future that is ahead of us and there I don't want to point to governments all the time but to have a clear transition path to get a few, okay but this is the direction the future we all want to live in I really hope this will help to change behaviour and come up with also some tangible things that matter for you personally and what you can do personally because now you think okay but if I don't do this if I do this what is the impact that we are really having like we can all stop stop driving our car to work but that's not going to save the planet right there are bigger solutions for that so to have a clear transition path and also to to sketch a future that we want to live in I think this is a very important trigger to to change behaviour and then yeah I want to maybe to add thanks a lot Roger I think you made some excellent points so maybe first on some things that maybe I can answer and others that I have to reflect about sincere I think that in terms of how do we want to structure the debate this whole strategy review there were for the first time I think what we call ECB listening events where indeed the president, other board members many governors of the national central banks have organised a little bit roundtables like this one but with ordinary citizens not maybe people representing also by the way but not only representing organisations and that I think is something that we have learned from that is useful among other things because it forces us to speak in normal language and try to be able to explain these difficult economic concepts in everyday people's lives which I think is very important that we are able to do so and we learn how to do so so we have had these ECB listening events I think today's outreach is something that is inspired by that and we will do so in the future so this is not the last time we do so of course we have other structured dialogues for example with the European parliament both the president of the ECB but also the chair of the supervisory board have their quarterly meetings with the European parliament in which we are challenged not least on climate and environmental related issues by the way much more than some years ago so this is very much part of the dialogue that we have also with the European citizens representatives in the European parliament and then of course we try as much as we can to use all the modern media to also reach younger generations who might not be so interested in price stability, financial stability as such but are extremely interested in the climate related issues that we are talking about today so we do podcasts we are active on very social media in order to try to also bring a dialogue and by the way there of course the dialogue can be very direct because people immediately can answer and they do and they don't spare us that is one part of the answer the other part is how do you change people's behavior and that is of course a difficult thing to do so the first thing I learned from your question when you said do you challenge the banks how they try to change the behavior of their clients I have been thinking in terms of how they change behavior of their corporate clients for example in terms of what we talked about a little bit earlier of data that they need to get from their corporate clients I haven't been thinking so much about how they can change their citizens clients if you like, good question so I'll think about that trying to change banks behavior that of course is the very essence of what supervision is we try to get them to do something that they were not going to do by themselves or we try to keep them from doing something that they want to do but we think it's not sound so a whole supervision the essence of this is trying to steer banks behavior there of course we have a whole set a whole toolbox of instruments going all the way the capital charges fit and proper testing you name it maybe the most important thing is our conviction power really making clear that if you are a banker today you need to have a business model that is compatible with the 21st century and not with the 20th century and that means a business model that pairs the line that means a business model that will reap the fruits of this great transition that we are making great in terms of big but in the end also great in terms of creating a sustainable world that we all want once bankers understand that that that is what they want to do because it's better for the world but it's also better for their balance sheet and there is actually no no clash between these two but they can be reconciled and they can be reconciled very well then our job becomes easier because then they are starting to run in the right direction and there we have double leverage because we try to influence banks behaviors and they can only change their ways if they in and on themselves change their clients behaviors and you make me think about individual clients behaviors I'll think about it a little bit more thank you very much I'm being mindful of the time because we promised to Frank that we will let him run quarter to five so maybe we won't manage to take all the free electronic hands that I see now but we will start with Paul Schreiber from Positive Money right? No, Reclaim Finance sorry Paul but with us we will click you through and yeah, if you try to be brief maybe we still have time for two of your colleagues to take the floor Paul absolutely, thank you thank you, hello everybody thanks a lot for this presentation my question and I will be brief is about one of the items of the Climate Code Map of the ECB which is the carbonization of the asset purchases of the ECB so it's something that the Climate Center will work on in 2022 but today we have relatively little information about the objective that the ECB has regarding its asset purchases its corporate asset purchases and the potential criteria that can be used so I was wondering if you had any precision about what could be the criteria and what would be the calendar the Climate Center would have to work on this specific issue thank you very much Irana? Thank you Paul excellent question and and here I have to say it's the Climate Change Center we're there but there are many many experts around the bank working on this theme so it's not really us who are doing the hard labor here what I can say there that we're exploring all options within our mandate at the moment and we're really looking here again to everything we can do here so it's easy to say oh no this is not possible I always switch the question but if this is not possible what is possible so that's what we're doing we're assessing all the possibilities at the moment together with the Euro system central banks what can we do at this front this is what we're doing this year and I think you understand that if you're in the process of thinking it's not the right time to tell to be transparent about it because you need to have your proper thinking on things first before we publish anything so when we have something we will share what we can and in the meantime here also if you have any ideas please share and I think you've done already on this front so thanks for that already Paul because maybe if you'll allow me I'll be short because I would like to at least the dose I see now on the screen we everything that your organizations and others write publish send to us we look at that we make sure and Irene make sure that the right people within our organization get that on their desks and I from my position as a board member I want analysis on any suggestions that are out there so we receive from some of your organizations in the course of this week preparing for this this meeting already a draft paper and I've been sending that draft paper saying by the way that it was still confidential and all that of course already to some people within this organization because I saw some ideas that I thought I'm not sure whether people are working on this or they might not have a good answer or I cannot answer why we shouldn't just do this so be assured I cannot guarantee that everything that you come up with will be done but it will be looked at thank you very much Frank we'll go to Mark Beckman from Positive Money Mark please bear with us we will try to click you through and encourage you to turn on your camera and the floor is yours Hello, thanks a lot for organizing this event and for engaging with us as you already said I'm from Positive Money Europe and my question is about a paper that was prepared as part of the strategy review drafted by League of Staff members of the ECB on the legal mandate and it suggests that the secondary objective of the ECB provides legal ground for new monetary policy measures not yet envisaged under the primary objective of price stability and I'm wondering first if you can confirm this and second if the climate change center and ECB in general is working on such new proposals already thanks thank you very much okay I'll say something on the legal thing and you'd say something on whether the climate change center the very short answer is I very much stand by that paper so if you want a reconformation, yes what the analysis in that paper has not been changed that is how we look at it there's many things in that paper it's a nuanced paper nuanced paper and we stand by it what I can say on that is we're taking analysis at all fronts what we can do within our monetary policy operations and there we're closely looking at the mandate okay how does it fit and we're looking at all options there so and if it fits the first mandate why would we need the second one but it's also a way of looking at it maybe Mark because being a lawyer by training this is interesting for me one of the very interesting parts of this whole debate you might have seen some of my speeches and blog posts etc don't underestimate how the thinking also what can be done under the primary objective has been evolving and is evolving so maybe where some might have felt let me phrase it this way that in order to make some progress in this whole field one would need the secondary objective it could very well be that some of the things that we are working on and that we are contemplating and that people are thinking about could fit pretty well under the primary objective so that is just a thought that I also wanted to share thank you very much Frank and Irena and thanks Mark again for taking the floor I'm afraid we will have to close the seminar here thank you very much Irena and Frank for joining us today and for sharing your insights and we would also like to thank our participants from the civil society for their contribution and very insightful comments and questions as always we are really interested in hearing your feedback about today's seminar and any ideas you might have for the topics we can tackle in the future you should see a link to a short feedback survey in the chat and that will also be sent via email to you later but please look in the chat and use that link it shouldn't take more than a few minutes out of your busy schedule to complete and this survey and it would help us to tailor future seminars for sure we look forward to our future dialogue and in fact we would like to invite you already now to our next civil society seminar which will take place on the 22nd February and will be dedicated to the work of our single supervisory mechanism and the condition of European banks we will also tackle the issue of supervisory priorities and climate is one of those indeed we very much look forward to seeing you again but in the meantime also please do reach out especially if we didn't manage to take your question today please write to us on the civil society at ECB.europa.eu Frank would like to say a word well you just said it but I just wanted to really reiterate that I always feel awful to say that or somebody says that I need to go to but it's also unfair for me not to go to other people who are waiting for me but I also I really don't want any thought to be lost here so if some of those who have asked questions feel that we didn't address them all the way let us know if those who are still start with questions that you could not ask let us know because the whole idea of this is that you feed us with your input so the fact that that there's no more time now doesn't mean that your thoughts are not welcome so please just send it in yeah please do that and Irana and her team and Frank of course will be updating you regularly on the progress of their work but in the meantime please always do come to us also if you see any public consultations be it our acts or European institutions also reach out to us and give us your insight and your input again thank you very much for that that was all for today good night