If a deregulation stems from political decisions that could not be predicted, or its effects on inflation are calculated to disappear in less than one to two years, it will not elicit a reaction from the Riksbank as long as the rule of action is adhered to. The situation is different, however, if the economy goes through a series of deregulations or the price effects of a single deregulation continue for several years. This may lead to inflation being below the target more permanently, which in turn ought to lead, according to the rule of action, to a downward adjustment of the instrumental rate. The stimulus from monetary policy acts through the usual channels. So all else equal, one can expect a fall in market interest rates, rising share prices, a stronger expansion of credit and so on. General demand rises, employment moves up, unemployment falls and the inflation target is fulfilled. When the price effects have waned, there is a risk, if nothing else intervenes, of inflation rising above the target. To counter this, monetary policy responds by gradually increasing the instrumental rate again. Market interest rates move up, share prices fall and the growth of credit slackens. In other words, the customary transmission mechanism now works in the opposite direction, leading to some fall in production and employment as well as in resource utilisation. Another component of the process is the higher inflation’s limiting effect on household real income, just as the lower inflation benefited household income.

A recent large-scale study of some 6,000 corporate disclosures found that firms that published data on their Environmental, Social, and Governance (ESG) performance received cheaper debt funding, with environmental disclosures having the largest effect.12 And increasingly that message is getting across: three-quarters of UK board members believe structured disclosure along the lines of that recommended by the Task Force on Climate-Related Financial Disclosures (TCFD) will increase brand value, nearly half expect improved alignment with shareholder priorities, and a third already see tangible financial benefits.13 Table 1: Potential economic benefits of disclosing climate metrics (and costs of not)  Potential issuer benefits  Potential issuer costs from  from disclosing  not disclosing  Improved rating  Worse rating  risk premium  Higher asset valuations  Lower asset valuations  Financing  Size of investor  Access to more investors  Shrinking investor base  terms and  base  Credit rating Lower uncertainty  asset valuations  More expensive finance as Financing rate  Cheaper finance  raters/investors apply a risk premium  Fixed cost of  Lower cost of engaging  Confusion drives increasing  investor  with investors  costs of investor engagement  engagement 12 13  https://www.researchgate.net/publication/335016621_ESG_practices_and_the_cost_of_debt_Evidence_from_EU_countries https://www.carbontrust.com/news-and-events/news/two-thirds-of-major-uk-companies-to-incorporate-climate-change-risks-and 6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  Management of  Improved understanding  Weaker awareness internally  own risks  and ability to manage risks  and externally  Retail consumer  Improved brand image and  Customer boycotts harm firms’  Business  expectations /  hence demand / revenues  positions in contested markets  management  demand Supply chain  Awarded more contracts  Cut out of contracts from firms  expectations /  from firms seeking lower  seeking lower ‘Scope 3’ scores  demand  ‘Scope 3’ scores14  Human resources  Attracting, motivating, and  Challenges in hiring and  retaining staff  retaining key staff  Clean regulatory record  Fines and infractions  Regulation  Regulatory compliance  That’s all very well for firms with a good story to tell – but doesn’t it still pay laggards to stay silent?