A ‘tilt’ strategy starts from the same investment universe as a standard market capitalisation-weighted index, but then adjusts the weights on individual securities or sectors in that index up or down to reflect various climate factors. A common tilt might be ‘low carbon’, in which portfolio weights are adjusted based on a measure of each issuer’s carbon footprint – or better still a forward-looking assessment of an issuer’s transition trajectory to net zero, such as that produced by the Transition Pathway Initiative.39 Tilt strategies avoid binary composition issues of the previous strategies, and can be dynamic in nature as the parameters used to construct the portfolios evolve. But they can be more reliant on those very consistent, decision useful and forward looking metrics I mentioned earlier, which are not yet universally available. 39  https://www.transitionpathwayinitiative.org/. 19  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  19  ‘Unconstrained’ investment – the final category in the chart – is a catch-all for the wide variety of active management strategies that investors can employ, either across an entire portfolio, or as an overlay. Such strategies may for example be driven by top-down or bottom-up research, or by quantitative statistical analysis of correlations between environmental factors and risk-adjusted returns. While such approaches have at least the potential to deliver stronger performance, by substituting judgment or modelling for current data gaps, they are clearly more costly to undertake and harder for end-investors to monitor.

One very obvious provision is the Dodd-Frank Act’s Section 604, which amends the Bank Holding Company Act to direct the Federal Reserve to consider, when it evaluates an application for approval of a proposed acquisition, merger, or consolidation, whether it “would result in greater or more concentrated risks to the stability of the United States banking or financial system.”10 In commenting during a recent press conference about the Federal Reserve’s objective as a consolidated supervisor of the holding company of many systemically important financial groups, Chairman Bernanke said “the primary goal of the consolidated supervision by the Fed is to make sure that the firms – the firm doesn’t in any way endanger the stability of the broad financial system.”11 Today, both the penumbra of the Federal Reserve Act and the express terms of the DoddFrank Act place financial stability within the Federal Reserve’s legal mandate. During the crisis, the Federal Reserve needed to restore financial stability so that the Federal Reserve could work to achieve price stability and maximum employment. The effort at restoration caused us to explore techniques we had never used before, and, as Chairman Bernanke exhorted us, to do “whatever it takes.” To succeed with this mission, lawyers at the Federal Reserve needed to interpret our authority in new and different ways, and we did so. I hope that my remarks today reflect on that important function of counsel. The role of counsel, of course, does not end with interpreting legal authorities to address new and unanticipated challenges.