financial models. good esg practices enable firms to benefit from competitive advantages stemming from innovation, to mitigate operating, legal and reputational risks, and lead to more efficient resource allocation, all of which tend to lower the cost of capital and to achieve better operational and market performance. for example, some analyses carried out by the bank of italy have provided clear evidence of a return premium on the shares of european electricity utilities with lower carbon emissions. experience has shown that reputational risks and the risk of serious losses for firms and their shareholders can instead arise from inappropriate business practices from an esg point of view. … and its cooperation with other institutions the increasing concern about the possible consequences of climate change for the financial sector has strengthened international cooperation in the field of sustainable finance, with several initiatives being provided by industry and the institutions. the bank of italy has contributed to these projects and will continue to do so. in recent years, in our role as members of the financial stability board, we have discussed the studies of the task force on climate - related financial disclosure ; we participated directly in those of the g20 green finance study group ; we are giving technical assistance to the ministry of economy and finance for the negotiations on the legislative proposals resulting from the european commission ’ s action plan on sustainable finance. in this field we have contributed to drafting both the disclosure requirements as regards the sustainability of the financial products offered to customers by market operators – including banks, investment firms and fund managers – and the regulations on new low - carbon benchmarks. together with the supervisory authorities of the other eu countries, the bank of italy will cooperate with the european banking authority in carrying out the tasks of identifying the risks that sustainability factors pose to the stability of the financial system, drafting methodologies to correctly assess such risks, and selecting the most suitable prudential treatment. it will also take part in the analyses scheduled by the european single supervisory mechanism, which has included climate change in its risk map for 2019. the network for greening the financial system was founded in december 2017, on the initiative of a number of central banks and supervisory authorities. this forum, in which we participate, has a broad membership at international level, and analyses are conducted and best practices are shared within it regarding the management of financial risks linked to the environment and climate change. the network aims to develop scenarios, methodologies and studies to integrate environmental and climate risks into microprudential and macroprudential supervision, collect evidence of the existence of risk spreads between

some time ago by the governing council and, taken together, are an appropriate and proportional response to the worsening macroeconomic outlook for the euro area. in previous meetings, there was already broad agreement that the outlook for economic activity and prices was disappointing. in july, we reiterated our determination to intervene decisively if the medium - term inflation outlook failed to improve. over the last few months, the signs of economic slowdown and weakening inflation have instead intensified. geopolitical tensions, including those relating to trade tariffs, and the sharp decline in international trade recorded in the last few quarters have continued to weigh on firms ’ confidence, on investment and on industrial production. the assessments of those who, one year ago, expected that the weakening in economic activity would prove temporary and would eventually subside have been shown to be increasingly optimistic. the slowdown was substantial for german and, though less so, italian industrial production, but it would be naive to underestimate its scope by considering it an asymmetric shock. if the worsening in the manufacturing sector proves to be persistent, it will inevitably reverberate across the other sectors of the economy. this is confirmed by the most recent data, which point to an area - wide slowdown in activity in the service sector, especially in germany. in a slowing economy, it is no surprise that inflation has remained very moderate and well below the objective of a close to 2 per cent annual increase in consumer prices in the euro area ; even with all the margins of uncertainty, the forecasts indicate that inflation is expected to remain weak over the next two years. we must counter the significant risk that the economic slowdown and the low level of inflation translate into a permanent reduction in inflation expectations or a re - emergence of the threat of deflation. the analyses conducted by the bank of italy clearly demonstrate this risk, regardless of the measure of expected inflation used : similar trends have been observed in the expectations derived from the financial markets, which may be affected by excessive reactivity on the part of investors, and in those obtained from surveys of professional forecasters, firms and households. a very recent study by bank of italy economists finds that the medium - and longterm inflation expectations in the ecb ’ s survey of professional forecasters are now much more susceptible to negative surprises to current inflation than they were in the past. this is a finding that confirms the one that our researchers had already obtained based on inflation expectations derived from inflation swaps. by all measures,