likely, the net impact of taxes and subsidies is close to zero. the absence of any significant carbon pricing has implications. first, it will be significantly more difficult to cut emissions in the absence of spectacular technological advances, which we yet have to see. second, in addition to the cost implied by physical effects of climate change – such as flooding and droughts – the economic cost of mitigation will be substantially higher than if driven by price incentives. regulated energy and emission standards have a significant potential, but are less efficient. third, we have to hope, if we do not promote, that technological advances have a climate - friendly bias. this may well have been the case in recent years as the costs of renewable energy and energy savings have come down substantially and are now competitive. but many of us underestimated the technological advances also taking place in the extraction of fossil fuels, such as shale gas and deep water drilling. as regards financing, climate - friendly investments would have been more attractive in a world of appropriate pricing and regulation of carbon. the absence of such policy action implies that we cannot expect financing to deliver as much as we would like. attracting financing on a large scale requires a strong enabling environment. investors seek the highest risk - adjusted return. but the 1 / 2 bis central bankers'speeches financial sector and financial authorities can and should nevertheless complement the fight against climate change, also with current public policy settings. what are the opportunities from the financial sector perspective? first, lots of profitable climatefriendly investment projects exist already. some on a large scale. in my country of origin, denmark, we have numerous encouraging examples of companies and institutional investors contributing to and benefiting from the transition to a low - carbon economy – both at home and abroad. others on a small scale ; simple efforts to save energy in households and firms. note that the low interest rate environment has shifted the investment balance in favour of upfront efficient capital and against outlays for energy year after year. second, the financial sector has to care about reputational risks. it will get questions from customers and the media. banks begin to check companies for their esg strategies before lending, out of concern for both risks and reputation. third, the financial sector should prepare for potentially stronger climate - friendly policies set by governments down the line. obvious and profitable climate - friendly investment needs often exist in areas of the world with difficult physical, economic or regulatory environments. such barriers can be reduced with technical assistance. these are

this would be a follow - up to a “ report by a study group on market liquidity ” which is currently being revised prior to publication. policies ( deemed financial policies ) having implications for financial stability. if information about how the supervisors are behaving is a necessary condition for ensuring that the banks are behaving properly, this code of transparency seems a useful initiative. the code of transparency is still in the process of being finalised, but in its current form it is based upon a sensible if ( to some ) radical framework. akin to what is increasingly being accepted in the realm of monetary policy, the draft code suggests there should be transparency with respect to the supervisors ’ mandate, the effectiveness of their powers, and their democratic accountability to other bodies. in effect, this code of transparency tries to ensure that the supervisors do their job in implementing the core principles. as noted above, transparency may be a necessary condition to ensure that supervisors carry out effectively their task of implementing the core principles. but it is hardly a sufficient condition. while the imf will be monitoring compliance with the code of transparency ( and also the implementation of the core principles themselves36 ), the influence the imf can exert may be relatively limited unless the country in question has an active programme with the imf. one complementary suggestion that might be helpful is the exercise of “ peer pressure ” on national supervisors. indeed, given that effective banking supervision is often resisted by the political authorities ( because of connected lending and other reasons ), central bank governors and finance ministers from developed countries might usefully try to put similar pressure on their counterparts in emerging markets. 37 in a similar if more extreme vein, a third suggestion would be to limit more aggressively the “ right of establishment ” in the world ’ s major financial centres. in effect, banks without an adequate supervisory framework in their own country would not be able to conduct an international banking business. this may seem radical, but has been a dictum among industrial countries since the 1975 basle concordat. 38 as well, some still more practical issues having to do with the incentives given to supervisors cannot be overlooked. supervisors must be paid adequately to prevent a constant haemorrhaging of staff to the private financial sector. other working conditions must be suitably attractive, including personal legal protection from litigation arising from official decisions. and lastly, supervisors must be properly trained and their training continuously updated to reflect new circumstances created by a changing financial world. the establishment at the bis of the