francois villeroy de galhau : green finance – a new frontier for the 21st century opening keynote by mr francois villeroy de galhau, governor of the bank of france, at the international climate risk conference for supervisors, amsterdam, 6 april 2018. * * * accompanying slides of this speech. ladies and gentlemen, what location could be more appropriate for a conference on climate change than amsterdam? two thirds of dutch territory is at risk of flooding as sea levels rise. 1 it is no coincidence that this country ’ s mathematicians, including prof. laurens de haan, have made decisive contributions in determining a safe height for sea dikes based on extreme value theory. 2 yet the interest of central bankers and supervisors in climate change may seem more surprising. though unexpected, it is not fashion, it is conviction : climate stability is, in the long run, one of the determinants of financial stability. this is even more important to us in europe because the treaties entrust the eurosystem with the task of “ supporting the general economic policies in the union ” ; 3 this includes “ the sustainable development of europe based on [ … ] a high level of protection and improvement of the quality of the environment ” 4 ( art. 3 ). and one thing is certain : time is running out. at the one planet summit in paris last december, president macron issued a stark warning that “ we are losing the battle ” on climate change. mark carney will tell us later on whether we have escaped the “ tragedy of the horizon ” 5 he famously described. clearly, if carbon emissions remain on their current trend, and if we want to keep the increase in temperature below 2°c, our global carbon budget6 will be consumed within 15 to 30 years. 7 as central bankers and supervisors, our mission is both humble and considerable. humble because the success of the paris agreement is the responsibility of the signatory states : the eu is committed to reducing carbon emissions by at least 40 % by 2030, 8 and financial regulation cannot be a substitute for an ambitious climate agenda. considerable because, we must do everything we can to support and complement the action undertaken by states. it is a great challenge for us, as supervisors in the 21th century. i would even say that it is our “ new frontier ”, comparable to the financing of growth and major infrastructures in the 19th century or the management of great financial crises in the last 100 years. for this reason, i am very

##iness, or because their current mortgages are underwater – that is, they owe more than their homes are worth. on the supply side, the large number of vacant homes, boosted by the ongoing inflow of foreclosed properties, continues to divert demand from new construction. after posting strong gains over the second half of 2011 and into the first quarter of 2012, manufacturing production has slowed in recent months. similarly, the rise in real business spending on equipment and software appears to have decelerated from the double - digit pace seen over the second half of 2011 to a more moderate rate of growth over the first part of this year. forward - looking indicators of investment demand – such as surveys of business conditions and capital spending plans – suggest further weakness ahead. in part, slowing growth in production and capital investment appears to reflect economic stresses in europe, which, together with some cooling in the economies of other trading partners, is restraining the demand for u. s. exports. bis central bankers ’ speeches at the time of the june meeting of the federal open market committee ( fomc ), my colleagues and i projected that, under the assumption of appropriate monetary policy, economic growth will likely continue at a moderate pace over coming quarters and then pick up very gradually. specifically, our projections for growth in real gdp prepared for the meeting had a central tendency of 1. 9 to 2. 4 percent for this year and 2. 2 to 2. 8 percent for 2013. 1 these forecasts are lower than those we made in january, reflecting the generally disappointing tone of the recent incoming data. 2 in addition, financial strains associated with the crisis in europe have increased since earlier in the year, which – as i already noted – are weighing on both global and domestic economic activity. the recovery in the united states continues to be held back by a number of other headwinds, including still tight borrowing conditions for some businesses and households, and – as i will discuss in more detail shortly – the restraining effects of fiscal policy and fiscal uncertainty. moreover, although the housing market has shown improvement, the contribution of this sector to the recovery is less than has been typical of previous recoveries. these headwinds should fade over time, allowing the economy to grow somewhat more rapidly and the unemployment rate to decline toward a more normal level. however, given that growth is projected to be not much above the rate needed to absorb new entrants to the labor force, the reduction in the unemployment rate seems likely to be