climate risk transparency revolution. 19 investment flows follow profitability expectations, and climate risks, both in terms of the costs of decarbonisation and the likelihood of physical damages, are growing investor considerations. with new disclosure regulations for business and investments, there is now a growing flow of climate data sources. this new information environment, coupled with strong government policy and commitments to targets, should align investment flows with transition goals. the policy mechanisms within our current prudential framework will also be adapted to contain climate risks. we have made it very clear that we will use all the tools at our disposal to enforce appropriate climate risk management, strategy consideration and internal governance. while it is a bit too early to conduct a wholesale recalibration of the capital framework, the availability of data and precision of risk forecasting is improving very fast and if risks are clear, large and quantifiable, we will have a strong case to act. such changes would align financial flows with transition risks, and support broader emission targets. conclusion let me conclude. past climate models predicted the present, and these same models will now guide us back to sustainability. if nations meet their targets, the climate should stabilise this century and take the world off its current dangerous trajectory. a focus on mitigation continues to be essential : an orderly transition is far preferable to alternative scenarios of doing nothing or doing too little too late. we need to avoid seeing 2050 as far away in the horizon and concluding that the problem will take a much longer time coming than everyone thinks, only to find it happening much faster than you would have thought. 20 achieving net zero by 2050 is unquestionably the lowest cost option for society, the economy and the financial system. different sectors have different roles and challenges in the transition. but net zero – at its core – is a real economy transition, ultimately dependent on business and household decisions to upgrade and switch. the financial sector ’ s role is clear. private sector investment targets will only be achieved through significant financing, whether by banking or capital markets. failure to decarbonise financial flows will lead to a build - up of climate risks in the system. central banks have a responsibility to monitor and forecast these risks, and then to act to maintain financial stability. the government ’ s role is also clear, as it has to steer the real economy to net zero by creating an environment that provides the right incentives and favours low emission choices. that much we know. we

overnight, fixed - rate, reverse repurchase facility ( overnight rrp ). in this facility, a number of financial entities, such as money market funds, that cannot hold reserves at the federal reserve can lend funds overnight to the federal reserve against the fed ’ s treasury collateral and receive the overnight rrp rate – currently 25 basis points. the overnight rrp provides these institutions with an alternative investment if the interest rate offered by banks is unattractive. consequently, these financial in this arrangement, the size of the federal reserve ’ s balance sheet was mainly driven by the amount of currency in circulation. as the amount of currency in circulation increased, this drained reserves from the banking system. the federal reserve offset this by increasing its holdings of treasury securities. the federal reserve gained the authority to pay interest on reserves earlier as part of the financial services regulatory relief act of 2006 ; that legislation authorized the federal reserve banks to begin payment of interest on reserves in 2011. as part of the tarp legislation, congress moved up the date at which the federal reserve could exercise that authority to october 2008. bis central bankers ’ speeches entities should be unwilling to lend funds to banks and others at lower rates than the overnight rrp rate. the overnight rrp rate should act, therefore, as a floor on money market rates. as i noted earlier, the tools are working as anticipated. not only is the federal funds rate trading close to the middle of the new 25 to 50 basis point target range, but the entire complex of money market rates, such as libor deposits and gcf repo, has also risen as well. moreover, apart from a temporary spike in usage around year end, which was expected, the usage of the overnight, fixed rate reverse repo facility has fallen back to levels similar to what we saw during the testing phase. in recent days, usage has averaged less than $ 100 billion per day. thus, the facility has been absorbing only a small fraction of the $ 2. 4 trillion of excess reserves in the banking system. this demonstrates that to firm interest rates, we don ’ t necessarily have to drain reserves or shrink the size of our balance sheet. we are very pleased by how well our tools are working, and this has reinforced our confidence that they will support the policy normalization process going forward. this is what we expected given our extensive testing, but there are always uncertainties that only can be resolved by actually getting underway. for example, there was some residual uncertainty about