Opening remarks by Frank Elderson at the NGFS
Conference
Paris, 17 April 2019
At the Conference of the Network for Greening the Financial System, the network presented its first
NGFS comprehensive report. In it, the Network issued six recommendations. The first four apply to the
work of central banks and supervisors, while the last two are for policymakers. In his opening speech
at the conference, Frank Elderson outlined why central bankers and supervisors have joined the
Network. Elderson describes why they engage in greening the financial system, what the Network aims
at and what steps are already taken during the year and a half that the Network exists.
In 1163 the first stone was laid of what later became the very heart of Paris. Two hundred years of
countless hands, building, carving, constructing together. A marvelous monument. A tribute to what
humanity can achieve. When working together, with a commonly held belief in a shared objective. The
day before yesterday the Notre Dame - so much Notre Dame burned. And all our hearts burned with
her. What was lost was a beautiful cathedral. What was lost was a jewel in the crown of the World's
Heritage. What was lost was a symbol of peace and worship.
But what was not lost, is our sense of common destiny. What was not lost is our acute awareness of
what we, humanity can achieve, when working together, with a common held belief in a shared
objective. In December 2017 the first stone was laid of what later became the NGFS. One and a half
years, countless hands, building, carving, constructing together. A marvelous coalition of the willing. A
tribute to what central banks and supervisors can achieve, when working together, with a commonly
held belief in a shared objective.
It's a therefore only appropriate that we are here in Paris.
Paris, where the seed for this initiative was first planted back in 2015, at the Paris Climate Agreement.
Paris, where the seed sprouted a couple of years later, at the One Planet Summit. I am happy to say
that the Network for Greening the Financial System has now firmly taken root. It is growing at an
impressive rate, with shoots popping up all over the planet. Only yesterday two new members and an
observer joined us. A warm welcome to The Swiss National Bank, Swiss supervisory authority and the
European Investment Bank. Today, the NGFS has thirty six members and six observers. Our
membership spans five continents. One planet.
But before I discuss what we have achieved and what we want to go on to achieve... Let's ask
ourselves a question: Why is being here today so important?
I: Why it is important?
Emissions have increased since the pre-industrial era, driven largely by economic and population
growth. This has led to increased concentrations of greenhouse gases, at higher levels in our
atmosphere than at any time in the last 800,000 years. Temperatures are already at least 1°C above
pre-industrial levels. In 2017, air pollution caused the deaths of almost 5 million people. In 2018, 62
million people felt the impact of extreme weather events. Over 2 million people were displaced.
The Arctic is warming up almost three times as fast as the rest of the planet. And as the ice melts, it
will cause the sea level to rise. This will undoubtedly have an effect on where and how we live. With
rising temperatures comes a decline in biodiversity, water scarcity, and mass migration as land
becomes uninhabitable. Problems of poverty and inequality will become even worse. The domino effect
of climate events will add to the already formidable challenge of rising temperatures.
A transition to a low-carbon, green economy is not a niche. It's not an optional extra for the privileged
few. Climate change affects us all. It reaches beyond economies, borders, cultures and languages.
When the world we live in is changing at such an alarming rate, who can afford to sit back?
That's why we need to come together and take action. To create a sustainable future. And that is
exactly what we are doing with the NGFS.
II: How & why Finance is involved
Since the publication of the NGFS progress report last October, it's no longer a question of asking why
we must get involved. Climate-related risks are a source of financial risk. That is why it falls squarely
within the mandates of central banks and supervisors to ensure the financial system can withstand
these risks. Our mandate doesn't restrain us. On the contrary, it forces us take a lead in addressing
climate change.
Next to managing risks, investment needs to be channeled in the right direction. To achieve the EU's
2030 goals of the Paris Climate agreement, including a 40% cut in greenhouse gas emissions, we need
to bridge an investment gap of 180 billion EUR per year. This is both possible and necessary. Because
failing to make these investments now is just postponing the inevitable. It means we will have to
invest even more by 2020, in order to mitigate the same or even worse effects. When faced with such
an imminent threat, inaction is reckless. It will ultimately lead to much higher costs.
III: Opportunities
I know I may have set alarm bells ringing with this call to action, but it's not all doom and gloom. The
transition to a low carbon economy presents a myriad of opportunities. Opportunities for every one of
us. Green investments for instance, offer direct advantages for the economy as a whole: more jobs
and more scientific and technological developments. Scaling up the use of sustainable energy and
other innovations. As well as more efficient use of our common resources. This will contribute to a
more circular and sustainable economy.
IV: On our way
The NGFS offers us a platform to address these issues and take action. It is a way of taking us from
where we are now, to where we need to be. A greener, more sustainable financial system must be our
destination.
NGFS membership has grown exponentially in under one and a half years. All continents are
represented, a clear sign that not only climate change, but also climate change action reaches beyond
borders, cultures, and languages.
In our first NGFS comprehensive report published today, we issued six recommendations. The first four
apply to the work of central banks and supervisors, while the last two are for policymakers. However,
all six call for collective action and focus on integrating and implementing previously identified needs
and best practices. Together, these recommendations aim to ensure that central banks, supervisors,
and policymakers are able to support the financial system, in playing its role in a smooth transition
towards a low carbon economy.
I expect that implementing these recommendations, sharing experiences, and developing practical
guidelines could create significant impact.They connect and multiply the convening power of each
individual central bank and supervisor. Together, NGFS members supervise 2/3 of global systemically
important banks and insurers. Financial markets that fall within the NGFS members' jurisdictions
represent 45% of global greenhouse gas emissions.
Yet, we still have a long way to go. The challenge we face is an analytically difficult one, and it is
unprecedented. I am sure I have left you in no doubt as to its urgency. So the benefits of us working
together to share experience and build practical guidance are monumental.
We have now reached the point that we need to move. Move from bold statements to boring but
crucial details. From sweeping visionary speeches to the nuts and bolts of the technical engine rooms
of central banking and prudential supervision. When we're knee deep in the weeds with these details,
we could easily be distracted from our ultimate destination. We can easily become preoccupied by the
bushes we cut away, the path we're finding, the progress we make. But we should never take our eyes
off our ultimate destination. It's not a question of being satisfied with taking a few steps forward. No.
We need to actually get to where we want to go. Getting to Paris. On time. That's where we want to
be.
This means a lot of work from you. The hard core technical part has started. The part where the
economists and econometrists deliver. Although you may be experts in the economy rather than
ecology, your expertise is equally valuable in both fields. I assure you.
Yet climate change is not the only challenge we face. The world will need fresh water. A decline in
biodiversity could limit the operations of businesses in a specific region. These risks too, could affect
financial institutions. I am pleased to see that these other environmental risks are also appearing on
our radar.
The next step we need to take, and soon, is to dedicate more resources to environmental risks and
how they have impact on our work. A lot still needs to be done. I hope today will inspire you to be
bold, think freely, stimulate each other, embrace competition and expand our horizons.
Because next year, when we gather again, I hope we will be making the same swift progress. I hope
we will be able to show how we have put these six recommendations into practice. And I hope we will
have explored new territories with new members. Because with your help, the seeds that were planted
here in Paris will grow even further and flourish.
Because there is no limit to what countless hands, what humanity, can achieve. When working
together, with a commonly held belief in a shared objective.