tcfd : strengthening the foundations of sustainable finance speech given by mark carney, governor of the bank of england tokyo, tcfd summit 2019 08 october 2019 i am grateful to jennifer nemeth for her assistance in preparing these remarks, and to ryan barrett, jennifer bell, benjamin bowry, kaja chhapia, lawrence dimery, benjamin guin, christopher gynn, sini matikainen, gordon readhead, mathesh sripraba, quynh - anh vo and matthew willison for background research and analysis, as well as to pwc for their research work.. all speeches are available online at www. bankofengland. co. uk / news / speeches introduction it is an honour to join this inaugural tcfd summit. there could be no better host than japan. prime minister abe made climate change an important theme of the japanese g20 presidency, calling on nations to put ‘ promises into practice ’. and environment minister koizumi recently said japan is “ committed to realising a decarbonised society. ” japanese companies are heeding these calls. in the past year, almost 200 japanese firms have joined the tcfd, bringing japan to the top of the tcfd league table. 1 this welcome progress, and that of the tcfd more generally, must be set against growing challenges. over the past five years, global carbon emissions have risen by 20 % and sea levels by over 3. 3mm per year. 2 global temperatures are on course to increase by 3. 4°c by 2100. 3 chart 1 : global warming projections to 2100 under different policy pathways the physical impact of these changes will not be evenly distributed. with ferocious typhoons, recordbreaking heatwaves and major landslides, japan is already at the sharp end of a new pattern of devastating extreme weather events. full list of current tcfd supporters available at : https : / / www. fsb - tcfd. org / tcfd - supporters /. climate. nasa. gov. available at : https : / / climate. nasa. gov / vital - signs / sea - level /. source : climate action tracker. data available at : https : / / climateactiontracker. org / global / temperatures /. all speeches are available online at www. bankofengland. co. uk / news / speeches the transition to a low carbon economy will also bring its own risks

is performing well, they are willing to grant credit, but when it is faltering, they are not so keen. do you see such a risk at present? as far as the capital markets are concerned, credit risk premia have increased significantly over the past months – for both high and low credit - rated firms. that tightens borrowing conditions for firms on capital markets and weighs on the economy. on the other hand we have so far not seen any such tightening in bank lending conditions in the euro area. overall, in light of these developments, we consider that the probability of a recession remains low. but are you worried that that will change, that the banks will tighten conditions too? banks in the euro area now hold much more capital than before and are better able to withstand shocks. they also have larger liquidity buffers. that ’ s all good news. at the same time, bank equity prices have fallen sharply and profitability is often very low, as is also reflected in the banks ’ very low price - to - book ratio of around 50 %. in such a context there is a risk that the banks could act even more procyclically than they usually do and would amplify the cycle. to be clear, the uncertainties and the economic slowdown have so far not caused banks to tighten their lending conditions or to grant less credit. but we need to keep a very close eye on how this evolves. how will the banks behave if the economic slowdown continues? would you say that financing conditions in the euro area as a whole have already tightened significantly? financing conditions have tightened somewhat in recent months, but not significantly, thanks in part to our forward guidance on interest rates. this partly compensates for such effects. but you ’ re absolutely right, we as central bankers must always ask ourselves whether our monetary policy stance is appropriate for us to attain our objective. and what is your answer at the moment? we have revised our assessment of risks to growth downward. i would say that is a clear indication that the level of alert is higher than before. 2 / 5 bis central bankers'speeches three quarters of below - potential growth, higher risks and at least slightly tighter financing conditions – what does that signify for the inflation outlook? is the ecb ’ s governing council losing its confidence in reaching the target of 2 % over the medium term? three quarters of below - potential growth are certainly not good news. but we have a medium term perpective