ewald nowotny : emerging markets – boom and bust speech by prof dr ewald nowotny, governor of the central bank of the republic of austria, before the united nations economic and social council, new york, 14 april 2014. * * * recent economic developments in emerging markets and outlook the global economy has gone through turbulent times since the outbreak of the financial and economic crisis in 2008. following the “ great recession ” in 2009, the global economy gained momentum in 2010 and 2011, mostly on the back of the strong economic performance of emerging market economies. after another slump in economic activity in 2012 and 2013, mostly due to the sovereign debt crisis in europe, advanced economies are now back on the recovery track while emerging markets have come under pressure. a decisive factor in this context seems to be the future conduct of monetary policy in advanced economies. the increase in government bond yields in the u. s. a. since early 2013 and the fed ’ s indication of may 2013 that it may taper its unconventional monetary policy have correlated with sizable capital outflows and currency depreciation in emerging markets ; this points to pronounced global macro - financial interdependencies. however, as i will discuss in more detail later on, it should be noted that domestic macroeconomic fundamentals play an equally decisive role in emerging markets. apparently, emerging market economies with larger external and internal imbalances have been faced with stronger currency depreciations ( as shown in the imf ’ s gfsr, october 2013 ). most of the countries under pressure tightened their monetary policies to dampen capital outflows. although these actions have so far helped to lift some pressure on financial market indicators, the cost of capital has increased, which is expected to dampen investment and weigh on growth. accordingly, in its recent world economic outlook the imf revised downward the 2014 and 2015 gdp growth forecasts for several emerging market economies ( among others, argentina, russia and turkey ). let me briefly stress the related impact on countries in central, eastern and southeastern europe ( cesee, “ emerging europe ” ). most of these countries have so far weathered the pullback of capital rather well. since 2008, current account and fiscal imbalances have decreased and most cesee countries have become less reliant on foreign capital. as a result, these cesee countries will most likely not be forced to abruptly raise interest rates to fight currency depreciation. for those cesee countries with well -

sheets and contribute to financing the green economy. since 2019, the banque de france has been the first eurosystem central bank to publish a yearly dedicated reportii on our responsible investment policy. and we turn our words into action : the banque de france is completely exiting coal by 2024. as regards green finance, climate change creates opportunities for investors : the expected transition to a lower - carbon economy is estimated to require around $ 1 trillion of investments a year. i will now focus on the top right of the quadrant : climate - related risks of financial institutions and the greening of monetary policy. these are the two “ key battle fields ”. regarding climate - related risks, there are two essential levers to win the battle : ( i ) disclosure of present data and their standardisation ; and ( ii ) forward looking assessments – the stress tests. the “ snapshot ” of the risks, and their “ video ”. disclosure will help markets to appropriately price climate - related risks and ensure efficient allocation of capital. that is why disclosure should become mandatory, at least as a first step for financial institutions, as it is already in france, and for large corporates. the eu, here too, leads by example, having decided standardised mandatory disclosure from next year on. because of data gaps and still a lack of clear transition policies, assessing individual or sectoral exposure to climate risks remains nevertheless a thorny issue, as highlighted in the latest ngfs report published last weekiii on bridging data gaps. hence, setting up an ambitious international reporting framework for climate - related financial disclosure is another key priority. this means achieving a common framework – basic but already significant – for all jurisdictions with the possibility to be more ambitious for those who want to. in addition, we should bring on board the “ double materiality ” promoted by the european commission : consider both the risks that affect the reporting entity itself and the impact it has on the environment through its activity, and also encourage a broad coverage of esg topics, not limited to climate change. in this respect, the ifrs initiative should not be self - sufficient, as it could neglect the s and g dimensions, and as such key standards are public goods, which require “ co - construction ” with political authorities. corporations, financial or non - financial, which proclaim themselves “ net zero by 2050 ” should also be able to disclose and provide a clear pathway, a strategy to achieve this goal, to make sure their commitment