aspiration into action, across the financial sector and the real economy. this phase involves a lot of hard work : the collection of data and the building of new tools that better enable climate considerations to be embedded in strategy and risk management. 1 / 7 bis - central bankers'speeches and i finished with a hope that we were fast approaching the third and final phase – with these tools actively used in financial and business decisions to progress an orderly transition to net zero. since then, a global pandemic, a war and the fastest tightening in financial conditions in thirty years have meant that things have not panned out as we might have expected. let's take stock of where that has left us. taking stock my prism on this is as a central banker and regulator, where we have good sight of how the uk's banks and insurers are building their approaches to climate risks. these firms sit at the centre of the economy, and their responses matter. i have seen a step - change in their approach. they are making more serious investments in developing effective capabilities – both to manage climate - related financial risks and to identify opportunities. but are they enough? let me explore this across four core dimensions : scenario analysis ; firm risk management capabilities ; disclosure ; and green finance. learning from scenario analysis i'll start first with scenario analysis - an essential tool for understanding the size and pathways of unprecedented and uncertain future climate risks. the bank has delivered its first climate scenarios exercise, the cbes. in my view this was transformative, both in shining a light on otherwise opaque risks and in building capabilities. importantly, the exercise required firms to understand how their real economy customers were both exposed to these risks and the actions they would take to manage them. this was one of the most challenging aspects of the work – as it revealed gaps in real economy firms'understanding of what climate transition means for them. a gap i will return to. the cbes also showed that costs were lowest, and opportunities greatest, with an early and well managed transition. that underlines that while governments set public climate policy, banks and insurers have a collective interest in managing climate - related financial risks in a way that supports that transition over time. managing climate related financial risks second, interactions with banks and insurers had revealed them to be in the early stages of developing their climate risk management capabilities. to address this, we set the world's first supervisory expectations for climate risks in 2019 – expectations that became

the shared response to climate change : turning momentum into action speech given by sarah breeden, executive director, international banks supervision, bank of england based on remarks made on 19 march 2018 following the second formal meeting of the green finance initiative and green finance committee, london published 14 may 2018 all speeches are available online at www. bankofengland. co. uk / speeches introduction thank you for the opportunity to explain what might otherwise not be obvious – why the bank of england has an interest in climate change. in addition to outlining our interests, i shall stress how this is a shared challenge – where the private sector and the financial authorities need to work together, respecting our different mandates, if we are to rise to the challenge ahead. and in doing so i will pay tribute to the work you have done here in the china - uk green finance taskforce. turning momentum into action is imperative. the practical work you are doing in the taskforce is key to making a real difference. climate change, financial risk and the bank of england ’ s objectives climate change, and society ’ s response to it, presents financial risks which impact the bank ’ s objectives. those risks arise principally on two dimensions : the physical effects of climate change ( for example from more frequent or intense storms ) ; and the impact of changes as we transition to the lower - carbon economy that is consistent with the commitments made by governments in paris two years ago. those risks have the potential to affect the bank ’ s core responsibilities both for the safety and soundness of the firms we regulate and for the stability of the financial system if there is a late, abrupt and disorderly transition. in particular, risks to financial stability will be minimised if the transition begins early and follows a predictable path. once climate change becomes a clear and present danger, it may already be too late. as outlined in the pra ’ s 2015 insurance report, and in our 2017 quarterly bulletin article on the bank ’ s response to climate change, there is evidence to suggest climate change is already having an impact. in looking at physical risks for example, on a global basis, weather related insured losses have increased from an average of around us $ 10 billion per annum in the 1980s to an average of around us $ 45 billion per annum so far this decade. and for specific weather events, there are indications that climate change is becoming a significant contributing factor. for example, lloyd ’ s of london has estimated that the 20cm of sea - level