talk about which tools can be used to incentivise sustainable investing. green supporting factors ( gsf ) and brown penalising factors ( bpf ) have often been under discussion. in my opinion, unless we have a very good basis from a financial risk point of view for risk differentials between green and brown investments, we should not introduce changes to prudential rules just for the sake of incentivising certain types of investments. but if we need to choose between these two, then it should rather be the brown penalising factors than the green supporting factors. the basis for this is that climate change and climate policies do not show up in past data and therefore the risks stemming from them are not necessarily reflected properly in the risk calculations. instead of supporting or penalising certain types of investments, supervisory expectations would be a convenient way of guidance. some supervisors, the bank of england for example, have set out supervisory expectations for financial institutions on how they should manage climate risks. the supervisory expectations of the bank of england cover governance frameworks, risk management, the use of scenario analysis and appropriate disclosure. in my opinion, risk management is the key element. to practise proper risk management, we need to figure out the best frameworks to identify and evaluate risks. we should also use some level of standardisation in the risk management framework for climate - based risks so that the outcomes are comparable between institutions. adequate reporting and disclosure are also relevant. to achieve proper risk management, collaboration and discussion between institutions becomes important. everyone knows that climate - based financial risks are challenging and difficult to approach, as we haven ’ t yet established a common framework. i hope we can lay a few building blocks for this framework today. i am very much looking forward to the panel on financial stability and the risks from climate change this afternoon. i believe that by discussing and sharing experiences, we will be able to find the best approach to this challenging issue of fighting climate change without compromising financial stability. we just need to find the best practices and at the same time execute wise financial regulation to support the greening of the financial system. now, let ’ s enjoy the second day of the conference ; we have a very interesting keynote and two panels yet to come. thank you! 3 / 3 bis central bankers'speeches

test be sufficient the restore trust in the banks? was the adverse scenario of the stress test sufficiently severe? the inflation in 2014 is much lower than the stress test assumes and a deflation scenario was not tested. a deflation scenario is not an explicit part of the test and we do not expect it to happen. but the adverse scenario of the stress test does include inflation very close to zero ( e. g. 0. 3 % in 2016 ). the most important thing is that the set of shocks which we included in the adverse scenario leads to a capital loss of 263 bln, a very significant amount. but the exercise should not be seen as an assessment of each conceivable risk a bank can face. if this was possible, it would make day - to - day supervision largely redundant and the exercise is most certainly not a substitute for the day - to - day supervision by the ecb. can we expect positive results on credit provision and economic growth quickly? the test as such is not sufficient to restore credit provision, but it is a minimum condition. the test, together with the balance sheet repair measures of the banks, should have an impact on credit provision in the euro area and thus be supportive to economic recovery, as banks will be able to access funding more easily, given that investors now have a clear picture and transparency has been improved. bis central bankers ’ speeches