and animal and plant extinction. in the form of disasters that threaten lives and livelihoods. nature and climate have gone rogue – in spain and in the netherlands, in europe and in the rest of the world. but - hope is the thing with feathers. 1 / 3 bis - central bankers'speeches to turn the tide, europe needs the green transition. sooner rather than later. but, of course, that costs money. the european commission estimates that a yearly additional investment of 350 billion euros is needed to meet the 2030 emissions - reduction target in energy systems. another estimated 130 billion euros is needed for other environmental goals ( refers to an external site ). in total, we are talking about 480 billion euros a year. both in terms of type of investment as in the sheer number, this is simply too much for the public sector alone. we need private investment. like equity financing. because more than debt financing, it is equity financing that will increase investments in green and innovative projects. because of the greater riskappetite of equity investors and their longer term investment horizon ( refers to an external site ). currently, however, european smes are heavily reliant on own funds and bank loans for their green and innovative projects. in the us, for example, they would be able to turn to venture capital. but that kind of market for risky investments doesn't exist here – at least not to the same degree ( refers to an external site ). as a result, successful, green, innovative companies lack funding for substantial growth. enter – indeed – a capital markets union. this would allow for a proper allocation of the necessary private investment for the green transition ( refers to an external site ). it would sustain investment flows. and it would strengthen our resilience to nature - and climate - related shocks. and this also works the other way around. today, sustainable finance products account for a small share of the euro area capital markets. but that share is growing. and that offers a leverage to foster a european capital markets union. because, compared to the aggregate bond market, the green bond market has a lower home bias. it shows a higher degree of integration. and euro area green bonds are held cross - border twice as likely as other bonds. green investment funds also have a more stable and committed investor base. and so, if green capital markets were to deepen further, sustainable finance could help advance financial integration in the european union. and remove the legal impedime

than other parts of the financial system. given banks ’ pivotal role as both financial intermediaries and providers of payment facilities, problems with one institution can easily cause contagion effects. central banks have an important task in mitigating these risks by offering secure payment settlement systems through which payments can be made in risk - free money. this also implies that central banks need to monitor their commercial counterparts intensively. at the same time, we cannot ignore the fact that commercial banks have become more exposed to other parts of the financial system, implying that our surveillance task should be broadened. for example, banks ’ increasing use of credit derivatives to transfer their risks to institutional investors, implies that these investors ’ ability to meet these financial contracts becomes a relevant factor. let me elaborate a bit on this new development in central banking, and how we deal with it at the nederlandsche bank. what do we mean by financial stability? according to our own definition at the nederlandsche bank, a stable financial system is capable of efficiently allocating resources and absorbing shocks, preventing these from having a disruptive effect on the real economy or on other financial systems. also, the system itself should not be a source of shocks. our definition thus implies that that money can properly carry out its functions as a means of payment and as a unit of account, while the financial system as a whole can adequately perform its role of mobilising savings, diversifying risks and allocating resources. financial stability is a vital condition for economic growth, as most transactions in the real economy are settled through the financial system. the importance of financial stability is perhaps most visible in situations of financial instability. for example, banks may be reluctant to finance profitable projects, asset prices may deviate excessively from their underlying intrinsic values, or payments may not be settled in time. in extreme cases, financial instability may even lead to bank runs, hyperinflation, or a stock market crash. how can we safeguard financial stability? although this concept is hard to capture by clear and observable targets, our definition of financial stability gives some clues. let me mention three. first of all, potential sources of shocks need to be identified. examples of shocks are interest rate hikes, financial crises in other systems, but also non - economic events like earthquakes and terrorist actions. obviously, shocks are hard to predict, but having some idea of their potential magnitude is useful for making financial systems more resilient. a second factor to look into