6  All speeches are available online at www.bankofengland.co.uk/news/speeches  6  3. Progress on transition as assessed against industry-specific transition pathways to help identify the leaders and laggards in the transition; and 4. Degree warming potential of the portfolio, which assesses the quality of transition plans relative to the Paris goals. Firms such as Aviva, Axa and Allianz have already voluntarily disclosed this information. They are now feeding into a TCFD group that is considering whether the warming potential, or any other metric, is the best way to measure the potential opportunities in the transition. For COP 26, we intend to leverage the success of existing groups and coalitions, like the Net Zero Asset Owner alliance, Climate Action 100+ and the UN PRI to build a large coalition of asset owners and asset managers who expect their portfolio companies to become Net Zero aligned. MDBs and Innovative Finance The work on reporting, risk and returns will put in place the foundations for private finance to help drive the transition to net zero, but much more must be done across the full spectrum of the financial sector. Multilateral Development Banks and Development Finance Institutions have essential roles in mobilising blended finance for adaptation, resilience and mitigation, especially in the communities most exposed to the devastating effects of climate change. As the Secretary of State noted, we will be asking these institutions to develop robust implementation plans for Paris Alignment in the run up to COP26.

Risk management means assessing the forward-looking disclosures to judge the resilience of firms’ strategies to the transition. 6 The full list of current TCFD supporters is available at: https://www.fsb-tcfd.org/tcfd-supporters/. 7 https://www.weforum.org/press/2020/01/measuring-stakeholder-capitalism-world-s-largest-companies-support-developing-core-set-of-  universal-esg-disclosures/. 8 https://www.wbcsd.org/Programs/Redefining-Value/External-Disclosure/TCFD. 9 Scope 1 means all direct emissions from the activities of an organisation. Scope 2 means indirect emissions from electricity purchased and used by the organisation. Scope 3 means all other Indirect emissions from activities of the organisation, occurring from sources that they do not own or control. 4  All speeches are available online at www.bankofengland.co.uk/news/speeches  4  To this end, the Bank of England will become the first regulator to stress test its major banks and insurers against different climate pathways, including the catastrophic business-as-usual scenario, the ideal - but still challenging - transition to net zero by 2050, and the late policy action - or climate Minsky moment – scenario that could bring a sudden recognition of the scale of stranded assets and the economy-wide disruption that a delayed and disorderly transition will bring.10 Our stress test of the world’s leading international financial centre will show how major financial firms expect to adjust their business models, as well as the potential collective impact of these responses on the wider economy. The stress test will reveal the financial firms - and by extension the companies - that are preparing for the transition, and it will expose those that have not.