, precisely because of this risk. consequently, the upshot could be a clear procyclical effect. in a nutshell, we must acknowledge that non - financial risk presents certain features that can exacerbate or compound the effect of a crisis. it is also very hard to estimate and, unlike traditional risks, cannot be eliminated ; at best, it may be mitigated. this would be the key question for today : what can we do to mitigate non - financial risk to the maximum extent? in my view, the mitigation of non - financial risk is linked to the quality of internal procedures, it systems, governance structure or compliance function of a bank. in other words, it is not so much about what banks should do, but how they should do it. naturally, enhancing governance, compliance or it systems is not easy. it generally involves additional spending that adds pressure to the already beleaguered profitability of the sector. understandably, some firms see spending in these areas as an additional cost. i believe it is more appropriate to see improvements in it or governance as long - term investments. in this context, it is worth noting that we are observing adjustments in business models. some institutions might need to undergo radical transformation, while others need just fine1 https : / / www. esrb. europa. eu / pub / pdf / other / 150625 _ report _ misconduct _ risk. en. pdf 3 / 6 tune their structures. in all cases, we see digitalisation and optimisation of processes, with potential impact on the internal control functions. we also see an increased reliance on outsourcing and an attempt to implement more agile and flexible ways of working. all these trends imply changes that pose additional risks. in this regard, there are some critical elements that banks need to consider in their management of non - financial risk. let me say a few words about these elements. starting with it, i think nobody questions by now that technological change should be part of deeper considerations regarding the sustainability of the banking business model in the long term. if we look at what has happened in recent years in other sectors, there is clearly a need for the banking business model to adapt to a new reality. true, technological adaptation calls in many cases for significant investment in systems to be made. however, such investment today will be key to fostering profitability in the future. a lot of people think that it change is mainly related to the so

has shrunk the space for interest rate policy owing to the existence of a lower bound on nominal interest rates, thus making it harder for central banks to achieve our inflation aims. climate change will likely affect the natural interest rate, but it is not obvious in which direction. on the one hand, it could ( further ) depress natural rates through negative effects on productivity, such as the impact of higher temperatures on labour supply and the destruction of capital stemming from natural disasters. however, the transition towards a more sustainable economy will require substantial investment in green technologies, which may push real rates up. clearly, more analysis will be needed before we have better answers for the implications of climate change on the economy and on monetary policy. and, in this regard, we have to step up our efforts, at both the banco de espana and the eurosystem, to develop the tools and models needed for such an analysis. in addition, climate change will affect the risks of the assets held on our balance sheets. monetary policy implementation exposes us to such risks directly through holdings of assets and indirectly through collateral pledged by counterparties. in this regard, and very much related to my previous comments on the implications of climate change for the financial sector, central banks also have to step up their efforts to incorporate climate change into their risk management models and frameworks. and this, together with climate - related disclosure requirements, can decisively contribute to the correct pricing of climate - related risks by financial markets. moreover, central banks can – and probably should – use their non - monetary policy portfolios, within the natural remit of their mandates, with a view to contributing towards the goal of addressing climate change. actually, the banco de espana has led by example in recent years in adopting these considerations. since 2019, we have applied sustainability and responsibility investment principles to our non - monetary policy portfolios, which has effectively led to an increase in the share of green bonds in these portfolios. more recently, the eurosystem has agreed on a common stance on this issue, aimed at contributing to the transition to a low - carbon economy and to eu climate goals by increasing the awareness and understanding of climate risks while promoting climate - related disclosure. to conclude, we, central bankers and financial regulatory and supervisory authorities, within our mandates of guaranteeing price and / or financial stability, can and should actively contribute to global action to fight against climate change. thank you. the natural interest rate is the level of real interest rates consistent