This is an uncomfortable basis for a forecast of a benign adjustment process, not least because at some point the interests of those on one side of the balance may change. I think this mix of challenges in our fiscal and external positions deserve concern and attention. They may end up being diffused gradually and benignly, but they necessarily bring with them a greater risk of higher risk premia, a more adverse investment environment and poorer growth outcomes. Under some circumstances, this could undermine an important foundation of the environment for innovation that has delivered our productivity acceleration. What can we do to mitigate the risks in this constellation of forces? We can work to keep monetary policy credible, to preserve confidence we will act to keep inflation and inflation expectations stable at moderate levels. We can act to raise public sector savings, begin to bring our entitlement commitments and our resources closer into balance and build a greater financial cushion into our financial future against the risk of a less benign world. We can make sure we keep our markets open, and to support rather than resist the integration of China and India into the world economy. We can work to make sure that our financial system remains strong, with a substantial capital and liquidity cushion, a more resilient infrastructure and continued rapid innovation in financial intermediation. And we can work to improve educational opportunities in this country, to improve educational achievement and to improve public awareness of economics and finance.

Disclosure metrics force us to confront the question of where we are and where we want to be, and thereby drive different decisions today. Knowing that we will be publishing our next TCFD disclosure in less than 12 months creates discipline and urgency. That brings me to the management of climate risks. Last year we became the first central bank and supervisor to set out supervisory expectations for banks and insurers on the management of climate risks.2 And this year we wrote to CEOs with more guidance, putting in place a deadline for firms to meet our expectations by the end of 2021.3 Of course, this is no easy task. That is why we have worked closely with industry through the Climate Financial Risk Forum (CFRF) to publish a practical guide for firms so that they can implement changes.4  1  https://www.bankofengland.co.uk/prudential-regulation/publication/2020/climate-related-financial-disclosure-2019-20 https://www.bankofengland.co.uk/prudential-regulation/publication/2019/enhancing-banks-and-insurers-approaches-to-managing-thefinancial-risks-from-climate-change-ss 3 https://www.bankofengland.co.uk/prudential-regulation/letter/2020/managing-the-financial-risks-from-climate-change 4 https://www.fca.org.uk/transparency/climate-financial-risk-forum 2  3  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  3  As a central bank we are not only concerned with resilience at a micro-level, but also at a macro-level. That is why in July 2019 we announced our plan to launch a climate stress test exercise.5 When the pandemic hit, we decided to postpone the exercise in light of strain on firms’ resources, and to ensure the ambitious scope of the exercise could be maintained. We have used the extra time to continue our work on the design of the exercise, and firms have been busy preparing for it.