As regards, banks’ securities portfolios, only 1.6% of their holdings stems from sectors characterized by high CO2 emissions, with 5.2% invested in mid CO2 intensive sectors. Insurance companies and investment funds turn out to be more invested in high and mid CO2 intensive sectors, at about 14% and 10% of their securities portfolio respectively. (FSR Interim 2021) Overall, this paints a fairly favourable picture for the Maltese financial system: the potential impact from climate risks is judged as relatively contained, although data limitations and early-stage nature of such exercise caution against an exceedingly benign interpretation. Addressing climate change will require substantial investment, both in shifting away from dependence on fossil fuels and in adapting to higher temperatures, droughts and more extreme weather events. This investment will need to be financed. A growing segment of financial markets relates to “green” instruments, which allocate resources to finance environmentally-friendly investment. Whichever the starting point, the transition to “green finance” is to be supported. The green bond market, for example, has been growing strongly in recent years, reaching a volume of cumulative issuance of about 1.5 trillion USD in 2021. While it remains a niche relative to the overall bond market, there is evidence of investors’ interest for instruments aimed at financing environmental projects. 6  According to the ECB trading in secondary markets bears evidence of a “greenium”, that is a premium that investors are willing to pay to hold green bonds compared to securities with identical characteristics.

Both the Bank and the government would be studying this possibility. The third core objective of Eurosystem relates to sharing expertise and fostering wider action towards the adoption of clean source of energy. Such efforts will take several forms. The Eurosystem is working to enhance transparency by bridging data gaps working in tandem with European and international partners. Transparency shall apply to the Eurosystem’s own actions as well. The ECB and the central banks of the euro area will be disclosing climate-related information about corporate purchases, non-monetary policy portfolios and environmental footprint. Lastly, the Eurosystem is also striving to reduce the environmental footprint of its day-to-day corporate activities. The Central Bank of Malta is doing its part. In line with the Eurosystem’s common stance for climate change-related Sustainable and Responsible Investments (SRIs), the Bank is incorporating such principles in the management of its non-monetary portfolio of assets. The Bank manages part of its assets externally through mandates, ETFs and mutual funds. In the selection of asset managers, the Bank verifies that they have subscribed to the United Nations Principles for Responsible Investments and therefore committed to include ESG considerations in all their investment decisions. In accordance with such principles, the Central Bank disinvested from companies involved in the tobacco industry and/or linked to the production of nuclear weapons in 2021, while progressively increasing the share of green, social and sustainable bonds in its internally managed portfolios. 8  In conclusion Global warming requires us to rethink thoroughly the way we live, produce and consume.