has estimated that global fossil - fuel subsidies exceeded eur 250 billion in 2016. this is a direct subsidy for fossil fuel consumption at a time when we have problems in finding out how to pay for the transition to sustainable energy. this balance must be changed. ending fossil fuel subsidies is only the first step. as a second step, we need to incorporate the costs of emissions into the decision - making processes of every company. fixing the eu emissions trading system or introducing a global carbon tax should help solve this externality problem. the third step is to increase transparency in companies ’ business models by requiring them to disclose their emissions. the commission and the financial stability board have been working on such reporting. many large institutional investors have already embraced their recommendations. as i have argued, there is much that can be done in the financial sector to promote sustainable development. however, there is no single ‘ silver bullet ’ that would solve the problems of environmental finance at a stroke. rather, it will take a lot of careful and detailed work, going through our regulatory systems and financial management frameworks, to build a more environmentally friendly and solid financial system. at the bank of finland we want to play our part, too. we have recently decided to apply responsible investment standards to the management of our investment portfolio. we will also be a member in the newly created central banks and supervisors network for greening the financial system, which is an important forum to discuss climate action with the financial sector. finally, everybody needs to be part of the change. hence, i call on both private companies and public institutions to work for sustainable development – and for sustainable finance – with the economically and socially effective means at their disposal. thank you very much for your attention. 3 / 3 bis central bankers'speeches

differs from country to country in these regions. what is, however, different from the south asian and some of the middle income east asian economies, is that some of these economies, such as japan, hongkong, taiwan, singapore and korea have large financial sectors, given their state of development, and have proceeded with a swifter adoption of irb approaches, almost consistent with the implementation schedule of basel ii. but again, the process of implementation is dependent on the state of technology prevalent in the banks in these countries. china has been pursuing a very cautious and steady approach in respect of basel ii, and it plans to put in place first of all international accounting systems and then a robust risk management system before it graduates to basel ii. let me now turn to the issues, challenges and the implications of basel ii. in some senses basel ii is a revolution in regulation and risk management. according to the kpmg international whitepaper, depending on its current risk management processes, size, customers, portfolio and markets, a particular bank is likely to experience varying effects of basel ii on at least four levels, namely internal processes, customers, businesses and global interaction. however, it is not just the banks that will be impacted in the basel ii environment. i believe this accord would also affect the behavior of a number of other industries, including credit rating agencies, external auditors, banks ’ customers, regulators and finally the corporate sector at large. what are some of the key challenges pertaining to the basel ii accord? the list that i am about to cover is by no means an exhaustive one. first of all, i would like to underscore that there is an absolute need to instill a well functioning, integrated and efficient risk management system at the macro level by the supervisors and by the institutions. second, we need absolute accuracy and reliability of information. third, we need asymmetry in supervision ; we need to recognize that the markets are imperfect. fourth, industries face pro - cyclicality which needs to be recognized and due consideration needs to be given to incorporating this phenomenon. also, there are serious implications for access to finance for certain sectors, groups and the disadvantaged segments of the population, given that there is going to be a huge operational cost for the banks and the regulator with the implementation of basel ii. and lastly, there will be cross - border challenges for not only pakistan but a number of other jurisdictions, including the developed countries. let me first briefly touch upon the risk management aspect