global mean temperatures to 1. 5 degrees, physical risks are likely to dominate the potential impacts of transition. and if instead we continue on our current trajectory, losses just from the impact on productivity could be as high as 13 % of gdp. 8 in addition, many of the leading studies, including those we used in the ngfs, start from past correlations and so find it hard to put an accurate number on the type of low - probability, high impact events that will become more common. as high levels of warming will be unprecedented, we don ’ t yet fully understand the delicate balance between the climate, living conditions, ecosystems and the economy - for example, the level at which ice melts might accelerate ; or methane stores under permafrost might be unlocked. what is clear is that investment is needed now to help adapt to these inevitable changes. and that we should recognise the gaps in our understanding of how large changes to our climate might affect our economies. challenges in applying scenarios while these key themes are clear, i know from our own experience, and from the firms we supervise, that applying the scenarios in practice is not straightforward. the models, data and analytical frameworks are new, and the transmission channels are complex and subject to much uncertainty. the results can be sensitive to input assumptions and type of model used. this leads to a tendency to focus on a limited number of transmission channels and pockets of risk – for example, focusing on the costs of emissions in the most carbon - intensive sectors and ignoring other channels like changes to demand or costs of energy and materials. but these are important channels too. we need to capture all potential dependencies and feedback loops. there are obvious dangers too in relying on past data and historical correlations for what is an unprecedented challenge. we need to re - examine existing models and consider whether climate change will cause some of these relationships to shift. there are perhaps parallels to the financial crisis where models provided false comfort. the most obvious case for this is in physical risk where we know there are non - linearities that are not well captured. all of these factors lead me to believe that financial firms and businesses are significantly underestimating the potential impacts, and ‘ green swan ’ events are not just possible but likely until capabilities, understanding and management of these risks are greatly improved. preliminary analysis for the updated ngfs climate scenarios. i would offer a few pieces of advice to users of scenarios. don ’ t get bogged down in a spurious amount of

andrew sentance : getting back to business speech by mr andrew sentance, member of the monetary policy committee of the bank of england, at the lunch hosted by the bank of england and the confederation of british industry ( cbi ), belfast, 24 november 2010. * * * i would like to thank tomasz wieladek and matt corder for research assistance and i am also grateful for helpful comments from other colleagues. the views expressed are my own and do not necessarily reflect those of the bank of england or other members of the monetary policy committee. it is a great pleasure to be back here in northern ireland for the fourth time in my capacity as a member of the monetary policy committee. as a former business economist, i greatly value the opportunity to visit individual businesses and meet with business groups in different parts of the uk, as i am doing on this two - day visit to northern ireland. and i would like to thank frances hill and her colleagues at the bank ’ s northern ireland agency for all the work they do with the business community here and for organising this visit. it is over twenty years since i first came to belfast when i was working for the cbi in the late 1980s. it was so long ago that nigel smyth was not yet then the cbi director here in northern ireland! and it may even have been before nigel joined the cbi as deputy director to alasdair maclaughlin, over twenty years ago. indeed, i would like to acknowledge in particular today the very substantial contribution that nigel has made to the business community here in northern ireland over the past two decades, in the face of many challenges and over a period of great change and opportunity. the northern ireland economy has made great progress since those days in the late 1980s and early 1990s when i came here with my cbi economist hat on. through the 1990s and in the 2000s prior to the financial crisis, northern ireland achieved an average rate of growth of 3 % a year – significantly above the growth rate recorded in the uk as a whole. 1 unemployment fell by two - thirds, from over 12 % of the labour force in the early 1990s to just 4 % in the mid - 2000s. as in the rest of the uk, the unemployment rate here in northern ireland has risen in the recession. but it remains below the uk average – in contrast with the 1980s and 1990s when unemployment here was significantly above the national average. there are clearly some particular challenges facing the economy here in northern ireland as we move