macroeconomic consequences of disasters ”, journal of development economics, vol. 88, no 2, pp. 221 – 231 ; parker, m. ( 2018 ), “ the impact of disasters on inflation ”, economics of disasters and climate change, vol. 2, no 1, pp. 21 – 48. 3 see giuzio m. et al. ( 2019 ), “ climate change and financial stability ”, financial stability review, ecb, may. 4 see carbone s., giuzio m. and mikkonen k. ( 2019 ), “ climate risk - related disclosures of banks and insurers and their market impact ”, financial stability review, ecb, november. 5 carbone s., giuzio m., mikkonen k. ( 2019 ), ibid. 6 these recommendations cover monitoring climate risks, developing taxonomies, promoting disclosures, and incorporating climate - related risks into prudential frameworks. 7 see krogstrup, s. and oman, w. ( 2019 ), “ macroeconomic and financial policies for climate change mitigation : a review of the literature ”, imf working papers, no 19 / 185, international monetary fund. 8 von peter, g., von dahlen, s. and saxena, s. ( 2012 ), “ unmitigated disasters? new evidence on the macroeconomic cost of natural catastrophes ”, bis working papers, no 394, bank for international settlements. 9 de haas, r. and popov, a. ( 2018 ), “ financial development and industrial pollution ”, working paper series, no 217, european bank for reconstruction and development. 4 / 4 bis central bankers'speeches

luis de guindos : implications of the transition to a low - carbon economy for the euro area financial system speech by mr luis de guindos, vice - president of the european central bank, at the european savings and retail banking group conference “ creating sustainable financial structures by putting citizens first ”, brussels, 21 november 2019. * * * introduction climate change is not new. scientists have been warning of the risks of rising global temperatures for decades. recently, these risks have gained greater prominence in public discussions, leading to enhanced international action. the paris agreement of december 2015 aims to keep the rise in global temperatures below 2°c above pre - industrial times, and to pursue efforts to limit it to 1. 5°c. without further mitigating action, that increase will more likely than not exceed 4°c by the end of the century in most scenarios. 1 central banks need to understand better the impact of climatic events on output, labour markets and prices over the medium term. 2 the disruption to economic activity and changes to the industrial composition are likely to be substantial. while the global economic implications of climate change are significant, on the whole they are poorly understood. today i will focus my remarks on the risks for the financial system. knowledge in this area is somewhat more advanced and central banks and supervisors have been working closely over recent years to share their knowledge and best practices. risks to financial stability climate change - related risks have the potential to become systemic for the euro area financial system, particularly if markets are not pricing the risks correctly. rapid crystallisation of risks, or of market repricing, could lead to substantial disruption. 3 the literature identifies two main risks for financial stability : physical risks occur from exposures to more frequent and more devastating disasters caused by natural hazards. transition risks arise from uncertainties surrounding the timing and speed of the transition to a low - carbon economy. i will focus on the latter, on financial institutions ’ exposures to transition risks. efforts have so far mostly concerned investments in certain industrial sectors. typically, the most climate - sensitive sectors are selected on the basis of an aggregate environmental metric, such as a measure of carbon emissions for the sector. assets in these sectors are at risk of a sharp repricing since the transition to a low - carbon economy may not be smooth. assets in other sectors are similarly vulnerable to changes in regulation, to the introduction of new technologies and to shifts in consumer sentiment away from products that are viewed as environmentally unfrien