This is an extension of a worrying pattern that has seen the number of extreme weather events more than triple and inflation-adjusted insured losses rise five-fold in the past three decades.2  1 2  See Munich Reinsurance Company (2018), ‘A stormy year: Natural catastrophes 2017,’ Geo Risks Research, NatCatSERVICE Ibid. 2  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  2  The outlook is even more concerning. As noted by HRH, last month’s IPCC report shows that many land and ocean ecosystems have already changed due to global warming.3 It concludes that the physical risks of climate change will intensify even under 1.5 degrees of warming, including increased heatwaves, droughts, heavy rain, flooding, melting of sea ice, and species loss. In turn, this will have a marked impact on human health, livelihoods, food security, water supply, human security, and economic growth. And that is very much the IPCC’s best case scenario. The impacts will be significantly worse under 2 degrees, and the Paris commitments – even if fully implemented – are consistent with more than 2.7 degrees of warming.4 The longer meaningful adjustment is delayed, the more transition risks will rise. To deliver on the Paris Agreement commitments and limit temperatures to 1.5°C, carbon emissions would have to decline by about 45% from 2010 levels to 2030 to reach net zero around 2050.5 Even if this happens smoothly, it will have major implications for most sectors of our economies. If the transition is delayed and then happens abruptly, financial stability risks will rise considerably.

For example, the IEA estimates that the transition could require $ in energy sector investments a year for decades – twice the rate at present.11 By 2050 we will need nearly 95% of electricity supply to be low carbon, 70% of new cars electric, retrofitting of the entire building stock, and an 80% fall in the CO2 intensity of the building sector.12 With an estimated $ trillion of infrastructure investment expected between 2015 and 2030, smart decisions now can make sure that investment is both financially sound and environmentally sustainable.13 Investing in more sustainable agriculture could deliver an estimated $ trillion in economic benefits per year and generate millions of jobs, while also improving food security and reducing GHG emissions.14 Reducing air pollution could not only prevent millions of premature deaths per year, but avoid over  11  See IEA (2017), ’Perspectives for the Energy Transition - Investment Needs for a Low-Carbon Energy System.’ Ibid. 13 New Climate Economy (2018), ‘The 2018 Report of the Global Commission on the Economy and Climate.’ 12  7  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  7  $ billion in lost productivity and health impacts.15 Getting climate disclosure right will mean that investment flows to firms which are managing the risks and seizing the opportunities. Ensuring our banks and insurers are resilient to climate-related risks will reinforce this process while keeping the financial system open for UK households and businesses in all types of weather.