Financing Major Transitions My second example of how the Bank is providing a platform for private innovation concerns the financing of the major transitions shaping the new economy such as the rapid rise of emerging economic powers and the evolving response to climate change. The transition to a low carbon economy, in particular, will require enormous re-allocations of capital and massive investments in infrastructure—on some estimates as much as $ trillion globally over the next decade. Firms that anticipate these developments will be rewarded handsomely; those that fail to adapt will cease to exist. This will have enormous ramifications both the financial system and for financial stability.2 That’s why the Bank is transforming our soft infrastructure. Recognising the need for adequate reporting of climate-related risks and opportunities, four years ago the Bank helped catalyse the private sector-led Task Force on Climate-Related Financial Disclosures (TCFD). The TCFD has now led to a step change in the demand and supply of climate reporting. With over $ trillion in assets now demanding TCFD quality disclosures, a market in transition is now being built. 1  RTGS Renewal Programme: A blueprint for a new RTGS service for the United Kingdom. Available at: https://www.bankofengland.co.uk/paper/2017/a-blueprint-for-a-new-rtgs-service-for-the-uk 2 Carney, M. (2019). A New Horizon. Available at: https://www.bankofengland.co.uk/speech/2019/mark-carney-speech-at-europeancommission-high-level-conference-brussels 4  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  4  In parallel, the Bank is overhauling its supervisory approach.

Indeed, more data was created in the past two years than in all the years that came before.5 And this data is creating enormous opportunities for the new finance to serve customers better and to manage risks more effectively. To those ends, the financial sector is investing heavily in the Cloud, Machine Learning and AI. Banking is already the second biggest global spender on AI systems (after retail) and is expected to invest a further $ on AI by 2020. AI-enabled solutions are increasingly important in fraud detection as well as automated threat intelligence and prevention. As some in the audience are exploring, there is also significant potential in credit assessments, wholesale loan underwriting and trading. As my colleague James Proudman recently described, such advanced analytics are also likely to lead to changes to the way the Bank conducts supervision.6  3  Supervisory Statement 3/19. Available at: https://www.bankofengland.co.uk/prudential-regulation/publication/2019/enhancing-banksand-insurers-approaches-to-managing-the-financial-risks-from-climate-change-ss 4 Network for Greening the Financial System; First Comprehensive Report 17 April 2019. Available at: https://www.banquefrance.fr/en/financial-stability/international-role/network-greening-financial-system/first-ngfs-progress-report 5 See https://www.domo.com/solution/data-never-sleeps-6 5  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  5  The PRA promotes safety and soundness based upon forward-looking, judgement-based supervision, in which we identify the key risks facing firms and set supervisory strategies to mitigate them. As a process, it can be broken down into three simple steps: 1) rule-setting and reporting; 2) analysis and monitoring; and 3) setting and communicating a supervisory strategy to mitigate identified risks. Each of these aspects of supervision is amenable to automation, machine learning or AI to some extent.