9  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  9  The cost of capital and employment The underlying point through all of this – that downside risks have particularly marked effects on decisions that are costly to reverse – is, I think, perfectly intuitive. One’s naturally wary about decisions that involve a degree of commitment but uncertain outcomes. Buying a house, taking a particular job, even getting married9: these are all decisions that are costly to reverse, to one degree or another, and that therefore require an extra degree of surety to be taken. You can also find examples of the same phenomenon within the economic sphere but unrelated to investment. Chart 8, for example, plots changes in our series on uncertainty against the ratio of two particular indices for hiring intentions – one for temporary posts, the other permanent – taken from the KPMG/REC employment survey. As you might expect, firms’ hiring intentions lean more towards temporary rather than permanent jobs, because the former involve less of a commitment, when they’re more uncertain about the future. Chart 8: Employment growth skews towards  Chart 9: More uncertainty boosts employment  temporary jobs when uncertainty rises  relative to investment  Sources: KPMG, REC, IHS Markit, Bloomberg Finance L.P., CBI, Consensus Economics, Dow Jones Factiva, Eikon from Refinitiv, GfK (research on behalf of the European Commission) and Bank calculations. Sources: ONS, Bloomberg Finance L.P., CBI, Consensus Economics, Dow Jones Factiva, Eikon from Refinitiv, GfK (research on behalf of the European Commission) and Bank calculations.

And you can, and must, make progress now whilst policy is developing – ahead of regulation and to support the development of best practice. A necessary foundation for that is investing in education to increase your staff's understanding of climate issues. Without that, none of this can happen. Transition plans are fundamental to driving the right transition. They allow financiers both to manage their risks and to allocate capital to support real economy decarbonisation. And by highlighting where there is clarity about the way forward and  4/7  BIS - Central bankers' speeches  where gaps remain, they compel the right conversations. I encourage you all to engage in them now. The second challenge is that the world does not stand still. We have seen unexpected political and economic headwinds and it seems prudent to assume more will come. With unexpected headwinds and limited bandwidth, longer-term issues can end up deprioritised. Issues do not though go away – quite the opposite, they build in the background. So we all need to be nimble and adaptable in our responses to the nearterm whilst continuing to make progress on the long-term. We must also learn lessons as we go. Russia's illegal invasion of Ukraine, for example, was a shock to our transition pathway and highlighted the sorts of disorderly transition risks we have been worried about. We saw first-hand the economy-wide costs of a necessary reduction in (Russian-imported) fossil fuels before alternative energy sources were in place - a reminder of the costs of disorderly transition.