financing. on the asset side, infrastructure investments will be essential. to transition to net zero, all countries need to step up their investments in sustainable energy. the reality of climate change also means that all countries, but particularly developing and emerging economies, will need to invest in new climate - resilient infrastructure in order to adapt to the new realities of a hotter and more volatile climate. there are various estimates – they are all enormous - ranging between us $ 70 - 90 trillion over the next decade, three quarters of which are in emerging and developing economies. 16 it ’ s imperative to act now to create practical tools and frameworks to support climate - resilient infrastructure investments – ranging from broader use of catastrophe bonds to greater risk pooling for the most vulnerable countries. climate - resilient infrastructure assets are well suited to life insurers that need reliable returns over long - term investment horizons. this is even more compelling in a low - for - long interest rate world. however, as the idf has flagged at present only 2. 5 % of insurance assets managed are allocated to infrastructure17. so the world needs much more investment in infrastructure, and greater risk sharing of climate risks. insurers have a unique ability to meet both needs. see https : / / oasislmf. org /. global commission on the economy and climate ( 2016 ), the sustainable infrastructure imperative. see : https : / / newclimateeconomy. report / 2016 /. world bank ( 2017 ), risk and capital requirements for infrastructure investment in emerging market and developing economies. available at : https : / / www. worldbank. org / en / news / feature / 2017 / 12 / 22 / risk - and - capital - requirements - for - infrastructure - investment - in - emerging - market - anddeveloping - economies. all speeches are available online at www. bankofengland. co. uk / news / speeches in this context, the impact of regulation on the provision and cost of infrastructure finance must be carefully considered. as world bank studies have shown, there is evidence that infrastructure debt can be lower risk as it has more predictable and stable long - term cash flows and has low correlation to other assets. the historical default experience of infrastructure debt suggests a ‘ hump - shaped ’ credit risk profile, which converges to investment grade quality within a few years after financing has closed. however, such robustness is not reflected in the standardised approaches for credit risk in

develop the approach in consultation with industry, including best practice insurers, and other informed stakeholders including experts from the network for greening the financial system and the pra ’ s climate financial risk forum. return there is increasing evidence that sustainable investment can generate excess returns, particularly for investors, like insurers, with longer term horizons. one of the biggest hurdles to channelling mainstream finance to sustainable investment is the inconsistent definition and measurement of environmental, social and governance ( esg ) criteria. an agreed taxonomy would allow markets to understand better where there is real outperformance and direct investments accordingly. the eu ’ s green taxonomy and the green bond standard are good starts but they are binary ( dark green or brown ) and don ’ t account for progress from brown to green – progress that could make a significant contribution to our climate goals. one possible solution, as recommended by the un ’ s climate financial leaders initiative, could be the development of transition indices which track companies in high - carbon sectors that adopt low - carbon strategies. such approaches are essential for our citizens to make sure their money is being invested in line with their values. conclusion ultimately, the speed with which the new sustainable finance develops will be decided by the coherence and credibility of countries ’ climate policies. finance will complement - and potentially amplify these initiatives – but it will never substitute for climate policy action. the policy frameworks with the greatest impact will be : time consistent ; transparent ; target - based ; and committed, through treaties, nationally determined contributions ( ndcs ), domestic legislation and consensus. the 20 countries – including the uk – that have plans to legislate for net zero show what can be done. all speeches are available online at www. bankofengland. co. uk / news / speeches if countries build their track records, their credibility will grow, and the market will allocate capital to deliver the necessary innovation and growth and pull forward the adjustment to a low carbon future. the more prolific the reporting, the more robust the risk management and the more widespread the return optimisation, the more rapidly the insurance sector can build resilience while promoting the transition that our citizens demand. all speeches are available online at www. bankofengland. co. uk / news / speeches