will in turn reduce their ability to borrow and fund investment and spending. it will affect the value of property. and it will affect the quality of the loan portfolios of banks. what does all this mean for ireland? take insurance first. our insurance sector is very international. for example, 80 per cent firms operating here conducted underwriting business in the european economic area ( eea ) ( excluding ireland ) in 2018. a substantial number of firms also operate further afield, outside the eea. the value of premiums underwritten outside of ireland was significant, accounting for 73 per cent of the total value of underwriting in 2018. the irish insurance sector is exposed to shocks from across the globe. and what of banks? irish banks are heavily exposed to property. as are households and businesses. property - related lending, for example, accounted for 68 per cent of the loan portfolios of irish resident banks in the third quarter of 201816, while the asset holdings of irish households are also heavily focused on property – accounting for almost 70 per cent of household net worth17. so adverse weather events that affect property can affect several aspects of the economy and financial system. transition risks in addition to getting active, what of the third request? imagining the world we want to get to is easy. a greener world with less plastic and ultimately – a low carbon economy without the devastating impact of climate change. however, the journey to this world is not risk free. the risks i am referring to here are termed ‘ transition risks ’. transition risks refer to : the impact of the adjustment towards a low - carbon economy ; and the uncertainties related to the timing and speed of the adjustment. 3 / 8 bis central bankers'speeches with regard to timing, the sooner we start on this journey the better. the longer we wait, the greater the adjustment that will be required to meet our goals. the speed of this adjustment must also be managed. as an economist, implementing a carbon tax seems like a sensible way to price in the externalities associated with high - carbon technologies and products. however, the implementation of such a tax must consider the capacity of the economy to switch to low - carbon products to be as effective as possible. adjusting to a lower - carbon economy will involve changes in policy to encourage shifts in consumption and investment. this will have implications for both economic activity and asset prices. the expectations of economic agents regarding the timing of transition will also play a role, affecting, for example, the

relative pricing of high - and low - carbon assets. through those channels, the adjustment will affect the financial system. overall, it is unclear if the market is placing enough weight on the potential for these costs and pricing them correctly. i believe two things are abundantly clear : 1. the costs of inaction will be much greater than the cost of action ; 2. the path of adjustment matters. a timely, orderly, predictable, scenario would allow sufficient time to adjust. a disorderly or sudden transition would clearly be costly and disruptive. opportunities for the financial sector to summarise so far, we can all take climate change personally and central banks are now getting active in thinking about how to address the risks on the journey to a better world that we can all imagine. given the role of the central bank of ireland in ensuring a resilient financial system, it is not surprising that i have focused quite a bit on risks from climate change. but that should not distract from the fact that these trends also bring significant opportunities for the financial sector. ensuring success will require technological innovation and investment. indeed, the intergovernmental panel on climate change ( ipcc ) estimate that the world will need to spend around 900 billion usd annually until 2050 on energy - related mitigation investments if global warming is to be limited to 1. 5 degrees18. for ireland, last year ’ s research from sustainable nation ireland estimated that making the transition to a sustainable, low - carbon economy by 2030 will require €50 billion19. this investment will cover a range of activities : developing disruptive innovations, including some that we may not already have thought about. expanding new types of infrastructures, including for clean sources of energy, not least given the potential increased cost efficiency of these. adapting existing infrastructures, such as retrofitting existing homes and offices to make them more energy efficient. the key point is that this investment will need to be financed. and, while there is a role for public investment, a significant part of the adjustment will fall to the private sector. this is where the opportunity for finance lies. to meet this challenge, the financial sector will need to innovate – just like the rest of the economy. the financial sector has a long history of innovating to meet the needs of its clients : from the atm to the digital wallet. innovations we ’ ve seen around green finance are just one dimension of how the financial sector is responding to this challenge. 4 /