current data gaps, they are clearly more costly to undertake and harder for end - investors to monitor. this analysis draws out an interesting interaction between the quality of climate disclosures, the structure of the asset management industry and the scope for rapid growth in the role of capital markets in climate investment. poor disclosures force investors either to form crude portfolios – which cannot send particular finely graduated price signals – or to seek active management – which, being costly, is not available to all. neither is ideal. it is only when disclosures have reached true maturity that the full panoply of modern asset allocation techniques can be brought to bear. that underscores just how vital it is to make progress on disclosures. there are as yet few comprehensive studies of the relative performance of current strategies. indeed, there is a genuine question about how such performance should be measured, given that one motivation for investing in climate - based funds is the desire to generate a measurable beneficial environmental impact alongside a financial return – so - called ‘ impact investing ’. there has been a long and lively debate about whether achieving this requires a willingness to sacrifice financial gain. some funds explicitly recognise this possibility in their construction, for example granting explicit concessionary rates to climate - positive projects. but others dispute the existence of such a tradeoff, noting the range of non - financial tools such as investor engagement that can act as ways to achieve impact. what is certainly true, as i ’ ve argued throughout this speech, is that such tradeoffs should not exist when the costs of emissions have been effectively internalised, and capital market structures have fully matured. that must be our ultimate goal. the choice of potential investment strategies is a live issue for the bank of england too, as a market participant in our own right. most of our asset holdings consist of uk government securities. but 2 % of the bank ’ s asset purchase facility consists of sterling corporate bonds, acquired as part of the mpc ’ s quantitative easing programme. as we stated in our tcfd disclosure, the framework for the mpc ’ s asset purchases is determined by the committee ’ s remit given to it by the chancellor. but, subject to the government indicating a willingness to update this remit, we will over the coming year be considering how to incorporate climate factors into decisions on the mix of financial assets, whilst still achieving our policy aims. we will have much to learn from the range of approaches already adopted in the private sector. conclusions so where

fixed effects. standard errors, which are clustered at the country level, are reported in parentheses. the results are robust under different specifications, including using a set of bank - specific control variables ( total assets, z - score, cost - to - income ratio, efficiency ratio, total debt, total liabilities, total gross loans ) and country - specific gdp growth. this association is there even as the set of control variables in the regression is varied. the association is also persistent : the coefficient on the reforms lagged by one year is similar in magnitude and statistical significance. the association is also economically significant. a reform that increases the index in a given year is associated with a 1. 3 percentage point reduction in the rate non - performing loans and a 0. 97 percentage point reduction in the subsequent year, all else equal. these results are consistent with what other papers have found. dincer and eichengreen ( 2012 ) find that lower non - performing loans relative to gdp in countries in which the supervisor is independent of the government. klomp and de haan ( 2009 ) find a negative association between a measure of financial instability and the degree of central bank independence. there is also evidence that supervisors that are probably more independent of the banks they supervise tend to be more robust. for instance, agarwal et al ( 2014 ) finds in the united states federal regulators are twice as likely to downgrade banks ’ supervisory ratings as state regulators. ben - david et al ( 2018 ) analyse the impact of supervisory responsibility for large banks moving from national regulators to the ecb ’ s single supervisory mechanism or ssm. they find banks for whom the ssm became their supervisor sought to manipulate their balance sheets to fall below the thresholds for being in scope of the ssm, suggesting banks anticipated that the ssm would be a tougher supervisor. i would like to thank matthew willison, hugh burns, nicolo fraccaroli and david swallow for their assistance in preparing these remarks the results in table 3 mean that when countries implemented reforms that increased the independence of their prudential regulator and / or supervisor, non - performing loans as a proportion of total lending decreased. greater regulatory independence increased financial stability. but did greater regulatory independence come at a price of less efficient banks or slower credit growth, a version of what is sometime referred to “ as the stability of the graveyard ”? it seems that it did not – see table 4. first, the authors replaced the non - performing