boris vujcic : adapting to climate change has no alternative speech by mr boris vujcic, governor of the croatian national bank, at the online event " the role of banks in greening our economies ", 29 april 2021. * * * ladies and gentlemen, dear colleagues, let me first welcome all of you who have gathered in front of your screens and decided to devote a couple of hours to join today ’ s conference. it is yet another event that the croatian national bank organizes jointly with ebrd, with whom we have a long lasting and productive relationship. both our institutions have recognized our responsibility to put the issue of banks ’ role in climate transition into the spotlight, and open a discussion on how banks, other financial institutions, and central banks and regulators can properly address the climate emergency that is already transforming our living and working patterns. until recently, it was uncommon for central bankers and bankers in general to talk about environmental issues. so, how did we get to this point, and why should we study the dynamics of climate change and environmental degradation and incorporate it into our business decisions? for more than fifty years people have known that the technological advancement and development that we enjoy comes at a price – the destruction of the environment and a perilous rise in global temperatures. as worrisome scientific discoveries heated up the activism and triggered a grass - roots ecological movement, global institutions and politicians soon embraced the environmental concerns as well. already in 1972, representatives from 113 out of the un ’ s 132 member states convened in stockholm for the first international conference on human environment. their decisions, enshrined in a declaration, action plan and five resolutions seemed to be a clear demonstration of their firm decision to fight environmental degradation. from then on, numerous meetings, conferences, agreements, protocols and declarations ensued, the climate change convention was forged, the kyoto protocol was adopted, but the outcomes fell short of targets adopted in these documents. it wasn ’ t until 2015 when heads of states and representatives of 197 countries, being aware of the real possibility that the world was approaching a climate tipping point, adopted the paris agreement and committed to make sincere and ambitious efforts to drastically cut their greenhouse emissions to prevent further global warming. the agreement, later ratified by 189 countries, did not only result in those countries ’ pledges on ghg emissions, but also in their understanding that engaging in climate change mitigation and adaptation should include a grand coalition of public and private entities devoted to achieving the same goal

on a reform without asking whether it fulfils the ultimate goal of raising people ’ s living standards. moreover, we can fall into the trap of measuring our success in piecemeal reforms without asking whether the whole spectrum of economic relations have moved forward together. therefore, we must bring the people forward with the reforms and ensure that they are politically accepted. if this is not the case, it may become a big obstacle to rapid transition ( as i will explain further in due course ). which reminds me of an old joke that we used to tell during socialism, and it goes something like this. during a preparatory seminar for future members of the then almighty communist party the local party secretary explained to the group of candidates that the future belongs to socialism and that socialism is the most advanced system in the world. a young candidate asks a question referring to permanent meat shortages under socialism : mr secretary, if we are so advanced how come there is no meat in our shops? the swift answer was : “ my dear comrade, we are advancing so quickly into the future that the cattle can ’ t keep up with us ”. i am not i arguing for slower reforms in transition, on the contrary, but let us not forget in our rush to market economies that transition is done for the benefit of the people. 2. what “ ingredients ” do we need to achieve sustained, rapid growth? economists agree that for transition to be successful we need sustained growth. therefore, the question of what needs to be done in transition ultimately leads to the question of what causes growth? the literature on growth has been expanding lately, but most work on transition agrees that macroeconomic stability linked with structural reforms is essential to growth ( wyplosz, 1999 ; fischer and sahay, 2000 ). and it is equally true that most transition economies have responded positively to the combination of the two and after a sharp decline in gdp today have positive growth. we have learned as well that the growth process is much more complex than was anticipated at one time. we know that the future success of reforms depends very much on elements like : institution building, contract enforcement, rule of law, etc. to explain the complexity of growth in transition a little bit i will use two concepts : a ) human capital and b ) social capital. a ) human capital let me immediately start by quoting lucas ( 1993 ) on what causes growth : “ the main engine of growth is the accumulation of human capital - of knowledge - and the main source of difference in