Thanks to their transparency efforts, we now know how to calculate climate indicators for more than 90% of the value of corporate bonds eligible with the Eurosystem. xii We also know how to do this for the bank loans of the largest debtors, which are also the most important in climate terms. The second step would be to extend the decarbonisation strategy to securities issued by financial institutions. To achieve this, banks will need to be able to assess their indirect emissions, generated by the activities they finance. xiii After determining the scope, the decarbonisation method remains to be defined. I believe that we should seek to achieve an adjustment of the valuation of all these assets according to the climate transition risk. This solution has the considerable advantage of avoiding the threshold effects that would result in simply excluding certain securities. Ultimately, we will be able to and must directly measure the additional financial risk associated with climate risk, and reduce the value of the assets accordingly: this is notably the aim of all the climate stress test methods that we are now actively working on at the Banque de France and the ACPR, such as in the framework of the NGFS. But pending their actual completion, we could choose a good "proxy" for this financial risk, namely climate alignment; i.e. aligning assets and firms with the 2°C trajectory set by the Paris Agreement.

3  For a description by the Bank of England of how quantitative easing works, see http://www.bankofengland.co.uk/monetarypolicy/Pages/qe/default.aspx. For a description by the Federal Reserve, see for example speech by Ben Bernanke, 31 August 2012, http://www.federalreserve. gov/newsevents/speech/bernanke20120831a.htm. For a theoretical description of the effects, see Michael Woodford (2012): “Methods of Policy Accommodation at the Interest-Rate Lower Bound”, http://kansascityfed.org/publicat/sympos/2012/mw.pdf?sm=jh083112-4 . See also Economic Commentaries 1/2011: “Om nye virkemidler i pengepolitikken. Avgrensning mellom pengepolitikken og finanspolitikken” (New monetary policy instruments. Delimitation between monetary policy and fiscal policy), Ragna Alstadheim (Norwegian only). 4  Classic references are James Tobin (1965): “The Monetary Interpretation of History”, American Economic Review, Vol 55, pp. 464–85 and (1969): “A General Equilibrium Approach to Monetary Theory”, Journal of Money, Credit and Banking, Vol 1 (February), pp. 15–29. For a more modern presentation, see Javier Andres, David Lopez-Salido and Edward Nelson (2004): “Tobin’s imperfect Asset Substitution in Optimizing General Equilibrium”, Journal of Money, Credit and Banking, Vol 36 (August), pp. 665–90. 5  See for example Arvind Krishnamurthy and Annette Vissing-Jørgensen (2011): “The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy”, Brookings Papers on Economic Activity, Fall, pp 215–65 and Jonathan Wright (2012): “What does Monetary Policy Do to Long-Term Interest Rates at the Zero Lower Bound?”, NBER Working Paper Series 17154. 2  BIS central bankers’ speeches  When a central bank purchases government bonds, it pays for the bonds with new electronic money.