, and physical risks are generally underappreciated. the longer that persists, the greater the risk of a sharp repricing, with the potential for substantial losses for financial institutions. at a minimum, this would impair the ability of the financial system to support the real economy and could even threaten the stability of our financial system. the efficiency and stability of our financial system in the face of climate change are closely linked and mutually reinforcing. by accelerating climate - smart capital flows, the financial system can reduce the risk of an abrupt and destabilizing adjustment. and by identifying, measuring and managing physical and transition risks, the financial system will improve the allocation of capital. information and disclosure are essential for the financial system to be able to do its job. companies need to assess, price and manage their climate risks, and they need to disclose these risks for markets to function well. this means companies must have reliable, consistent 1 / 3 bis central bankers'speeches and comparable ways to measure and state their exposures. financial institutions, too, must understand and be transparent about their own exposures. nothing i ’ ve said is particularly new, but these issues are taking on increased urgency. severe weather events are happening more often and with greater intensity, damaging real estate and infrastructure. more alarming still, scientists have high confidence that temperatures continue to warm rapidly, and this will contribute to more heat waves and an increased frequency of heavy rainfall. if we are going to overcome the threat posed by climate change, we — the world — need to move faster. there is also another reason for urgency here in canada. how well we address climate change is becoming a competitiveness issue for canadian businesses. consumers, workers and investors increasingly care about the environmental footprint of the products they buy, of the companies they work for and of the businesses they invest in. as a result, climate change is becoming an immediate bottom line business issue. a decade ago, in the wake of the global financial crisis, climate - change issues faded into the background. by contrast, today ’ s pandemic seems to have focused the public ’ s attention on extreme global risks and the value of resilience. in financial markets, global issuance of environmental, social and governance ( esg ) bonds has exploded in recent years and has not missed a beat so far through the pandemic. the flow of money into esg funds this year is roughly double that of last year, which was itself about triple

more than 3 million people found themselves working less than half of their normal hours. businesses closed shop in record numbers. inflation fell sharply, even dropping into negative numbers. we were staring down another great depression and the possibility of deflation. deflation happens when prices across the economy actually fall. while this might not sound bad, the truth is that persistent deflation is dangerous. when unemployment rises rapidly and overall prices begin to fall, households may reduce spending if they think that goods and services will become even cheaper in the future. but putting off spending results in less demand, leading to more job losses and more business closures. and this puts more downward pressure not only on prices but also on wages. both can spiral downward, as they did in canada during the great depression. deflation also makes repaying debt more expensive — which could have been a severe problem for a country like canada, with high levels of household debt. 1 / 3 bis central bankers'speeches so when the pandemic began and we were facing economic calamity, we took extraordinary actions. we lowered our policy interest rate as low as we could. we promised not to raise interest rates until slack in the economy was fully absorbed, and we reinforced this commitment using quantitative easing. taken together, these actions kept borrowing rates low to stimulate spending and instilled much - needed confidence in the economy so that businesses and households could recover. thanks to the resilience of canadians, effective vaccines, exceptional fiscal policy and the bank ’ s actions, canada avoided deflation and our economy has recovered. canadians are anxious but i recognize that this reassurance may not reflect how many are feeling. even before the pandemic, many canadians were worried about how they were faring economically. not everyone was experiencing the benefits of a growing economy and a healthy labour market. the pandemic intensified people ’ s concerns, layering worries about their health and that of their loved ones on top of uncertainty about jobs and businesses, the value of their savings and their prospects for retirement. reopening the economy has brought new complications, leading to higher inflation around the world and here at home. the covid - 19 virus continues to circulate and mutate. we are seeing social upheaval here in canada and in other countries. and in the last week, shocking developments have unfolded in ukraine at great human cost. the unprovoked russian invasion is also creating volatility and uncertainty in the global economy. we