Additionally, some firms are considering how to expand analysis to more indirectly impacted sectors, such as transportation and industrials, or to move beyond lending exposures to trading positions. Finally, firms are evaluating how to best execute on public commitments to transparency in the climate space. Nearly all global systemically important banks, including all eight U.S. G-SIBS, have signed onto the Task-Force for Climate-Related Financial Disclosures (TCFD), and many of these have started disclosing under this framework to various extents.5 Firms continue to be challenged in the identification and measurement of climate risk embedded in their portfolios, however, so these disclosures may take some time to develop as the industry considers how to 2/4  BIS central bankers' speeches  establish common standards. Role of Supervision I’ll turn now to the perspective of a bank supervisor.6 In the context of climate change, in my view, bank supervision should focus on ensuring that appropriate risk management frameworks are in place, rather than using supervisory tools for broader objectives. That is, supervisors can focus on identifying and managing risks, both microprudential and macroprudential, that emerge along a transition path to a more sustainable economy. Bank supervisors, however, are not in the position to advocate for, or provide incentives for, a particular policy outcome. Those broader policy goals are the purview of elected officials and governments, and policymakers. Supervisors can and should use our oversight tools to ensure financial institutions are prepared for and resilient to all types of relevant risks, including climate-related events.

From that perspective, climate change introduces challenges for supervisors related to time horizon, data limitations, and inherent complexity. 7 One question that gets particular attention centers on time horizon and prioritization. More specifically, given the many risks that financial firms face—cybersecurity, geopolitical uncertainty, and the credit cycle to name a few—and the relatively long time horizon around climate change, why should supervisors focus on this particular risk? I think that is a fair question and there are good answers. First, we are already observing the impacts of climate change on financial firms. Evidence continues to grow that climate change is affecting economic and financial outcomes.8 Moreover, evidence from climate science suggests that some further physical climate impacts are lockedin due to past emissions.9 Some investors consider an assessment of sustainability to be integral to their fiduciary responsibilities.10 And, as I described earlier, supervised firms are choosing to build capacity in this areas, so supervisors need to understand and assess these changes. This is a risk management question for today with direct implications for safety and soundness. Second, given the complexity of the problem, we all need time to build data, models, and intellectual capacity to address risks as they arise in the future. It took the better part of a decade to approach a steady-state in central bank stress testing capabilities for more familiar and arguably less complex risks like credit card losses or shocks to asset values from interest rate spikes.