and we are doing our bit to achieve that by running today ’ s symposium. what is more, i can well imagine instances where climate - related risks are also raised at supervisory meetings with credit institutions. i am a firm advocate of the idea that supervisors and central banks themselves should strive to perform a special function as a role model and catalyst. this means, for example, helping to forge a deeper understanding of how the mechanisms behind the risks work. it was for this reason that the " network for greening the financial system " was established only a short time ago. this network will serve as a platform for a group of central banks and banking supervisors from around the world to exchange views on climate risks for the financial sector, regulatory issues and green bonds, to name but three topics. whatever supervisors strive to achieve, i believe it is particularly important for us to establish a consistent taxonomy and uniform definitions as the basis for credible standard setting in the area of green finance. klaas knot will tell you more about this in just a few moments. so we're not coy about playing our part as supervisors in the decarbonisation of banks ’ balance sheets. yet there are other demands being placed on banking supervisors and regulators which i am keeping a very close eye on, because i consider them to be dangerous. in the debate surrounding the implementation of the paris climate targets, some have suggested using the prudential framework to actively steer financial flows away from emissions - heavy sectors to more environmentally friendly ones. more specifically, there have been demands recently for banking regulation to include special rules that tip the regulatory scales against environmentally unfriendly " brown " investments or in favour of " green " financial assets on banks ’ balance sheets – via capital requirements, for instance. this has been dubbed the " green supporting factor ". 5 / 7 bis central bankers'speeches however, sustainability in the sense of environmental friendliness does not necessarily go hand in hand with reduced risk – i already mentioned innovation risks earlier on in my speech today. and that is also why capital requirements should be calculated on the basis of just a single factor – the riskiness of the exposures in question. financial market regulation in general and banking supervision in particular need to be focused on their core tasks and remain geared to risk. watering down the regulatory mandate would create conflicts of interest and ultimately lead to risks to financial stability – and surely that cannot be what we want. the european commission today unveils its action plan on sustainable finance.

from the perspective of banking supervision. that is the risk which climate change and the transformation of the economy might present for the financial sector – and the matter of how far financial institutions will need to adapt to shield themselves from that risk. and last but not least, we as central bankers and supervisors need to face up to the question of the role we are able to, and intend to, play in transitioning to a green financial system. these three topics – the risks facing the financial industry, the opportunities for the financial industry, and the role of supervisors – are the subject of my speech here today. 2 the risk perspective : what are we talking about, exactly? let's begin by taking the risk perspective. mention climate change and the first thing most people think about is natural catastrophes : storms, heatwaves, droughts, floods and hurricanes. you might remember that last year ’ s atlantic hurricane season was one of the worst on record. catastrophes on that scale mainly inflict widespread human suffering, of course, but they also present economic risks, or " physical risks ", as they are known. and those risks can affect every one of us : individuals, government budgets, insurers, and other financial institutions. we are already seeing the costs materialising on the balance sheets of non - life insurers and reinsurers today. they add up to more than us $ 200 billion for the 2017 hurricane season. that is why these costs usually make the headlines. but natural catastrophes can have a direct impact on banks and savings banks as well if the assets they finance – be they real estate, production facilities or tradables – are affected. indirectly, this might disrupt value creation and delivery chains, having a knock - on effect on customers. and there is nothing to say that weather and climate - related losses of this kind will still be insurable if climate change continues to dramatically increase the likelihood of natural catastrophes and the expected amount of losses. but we need to think one step further. besides the direct impact of climate change, there are yet more risks which we need to bear in mind, because the shift towards a lower - emission, " greener " economy is itself a source of potential risks, which go under the somewhat unwieldy name of " transition risks ". the background to this is as follows. to make this transition, potentially disruptive technological advances and far - reaching changes in climate policy are called for. these developments will leave hardly