Recent regulatory and legislative initiatives reflect growing international awareness of the great value of transparent disclosures on C&E risks. In Europe, large banks will have to disclose climate-related information under the European Banking Authority’s comprehensive implementing technical standards. They will have to already do so by early 2023, referencing data from the end of 2022. The information requested from banks includes qualitative and quantitative information on environmental, social and governance risks, as well as indicators such as alignment metrics and the green asset ratio – thus significantly raising the bar in terms of C&E risk reporting. In the same vein, sustainability reporting obligations under the European Commission’s Corporate Sustainability Reporting Directive will shortly apply to large corporations, including banks under our direct supervision. Main findings of the ECB report on banks’ progress towards transparently disclosing their C&E risk profile The ECB is also well aware of the importance of transparent disclosures. We published our first stocktake of banks’ C&E disclosures back in November 2020. We did so precisely to give banks the time and the incentive to improve the quality of their own disclosures in this field. Back then, virtually none of the institutions in the scope of the assessment met our expectations as set out in the ECB Guide on climate-related and environmental risks, which we published at the same 2/4  BIS central bankers' speeches  time. The second stocktake, published today, shows that the quality of banks’ disclosures has improved since then, especially in the areas of risk management, governance and business models.

For me, the biggest and costliest downside risk is that in our haste to get back to “business as usual” monetary policy, we could stall progress and backtrack to the economic circumstances of recent years – an economy mired in the ZLB. To say the least, conducting monetary policy at the ZLB has been a difficult experience that we all want to avoid repeating unnecessarily. In the winter of 2009, with the unemployment rate soaring to double digits, the Fed would have very much liked to lower the nominal federal funds rate an additional 300 basis points; but we couldn’t because the rate was already at zero. Faced with a pressing need to provide additional accommodation, we were forced to turn to innovative, but controversial, unconventional monetary policies. These policies have been extremely helpful. But there is no denying that they were second-best options; the ZLB had made lowering the fed funds rate, which is our first-best interest rate tool, infeasible. Everyone will welcome a return to more normal times and a reliance on the traditional policy framework of adjustments to the federal funds rate. But the decision about when to begin to raise rates shouldn’t be made prematurely. Rather, the decision for policy liftoff has to be made for the right reasons – that is, it should be dictated by economic conditions. Like my colleague Minneapolis Fed President Narayana Kocherlakota. 2 I think that policy at all times must be goal-oriented. Our experiences since the crisis began and current economic conditions are highly unusual.