is likely we will pass irreversible tipping points in just 12 years. as the ipcc puts it, in their report : “ there is a significant risk of crossing critical thresholds and even triggering tipping points as warming goes from 1. 5 degrees to 2 degrees celsius. ” so waiting for climate change to become less of a “ hot ” topic is not an option. it will only get hotter. inaction is simply not an option. i must admit, in view of the findings of the ipcc and others, i was a bit surprised when i saw the topic of the next panel discussion : “ climate - related aspects in investment portfolios : nice - to - have or compelling necessity? ” for me, the question has long been answered and the answer is compellingly clear. fout! onbekende naam voor documenteigenschap. at this point, and given all the extensive scientific evidence, it is clear that climate change poses risks beyond anything seen in the modern age. it is clear that we need to make unprecedented changes to our economy and it should be clear that ignoring climate - related issues, is far riskier than facing up to them. so we should not discuss if, but how we respond to climate change. it requires urgent action to limit the damage as much as possible. and it takes collective action to avoid these irreversible tipping points. today, i would like to focus on what central banks, financial institutions and governments can do. role of central banks and supervisors central banks and supervisors are working together to produce a collective response to climate change. but our collective journey together started much later than 1992. last year, de nederlandsche bank hosted the first ever international climate conference for prudential supervisors. this conference was organized by the newly - formed central banks ’ and supervisors ’ network for greening the financial system. the ngfs. the ngfs was founded on the initiative of the banque de france. and i have the privilege to be the first chair of this network. at the conference we came to the conclusion that climate change is a source of financial risk. and one that is squarely within our mandate. this was still unthinkable in 1992, but now, this is a widely - shared conviction. the network has grown significantly. from the original eight founding members, today, the ngfs brings together 42 central banks and supervisors and eight observers, representing five continents, representing half of global greenhouse

countries had increased their current account surpluses after the asian crisis in 1998. this was partly to reduce their vulnerability and partly due to export - led growth strategies. these savings were mostly held in official reserves, which increased six fold to around five trillion dollars in only a decade. because financial markets within asia are underdeveloped, the reserves were invested in advanced economies, for instance in us treasuries. this may have reduced long - term interest rates and fuelled the credit boom. while the savings glut did contribute to global liquidity, it is not the only explanation. after all, asia still plays a relatively modest role in financial globalisation. asia, like many other emerging markets, is not so financially integrated. the average size of foreign assets and liabilities is only around 70 % of gdp in emerging markets, against a much larger 220 % in advanced economies. emerging markets usually have smaller financial sectors, less developed financial markets, and often a more domestic orientation. china has some of the largest banks in the world, but this is because of china ’ s enormous domestic market. their international activities are relatively limited, if only because china still has a closed capital account. capital flows from emerging markets therefore mainly consist of foreign direct investment, which is relatively stable and not so harmful for financial stability. by contrast, the volatile international portfolio and banking flows are dominated by advanced economies. the recent literature therefore suggests that the loose liquidity conditions before the crisis largely came from financial sectors in advanced countries themselves. the great moderation fed the perception that large fluctuations were a thing of the past, and this has reduced risk premia and increased leverage. this was reinforced by low policy interest rates, which were possible thanks to more credibility in monetary policy and because globalisation contained consumer price inflation. credit growth was fuelled further by financial innovations like securitization, and by the internationalization of banks. banks increasingly relied on foreign wholesale funding, which enabled them to expand credit much further than if they had only relied on domestic deposits. the us housing bubble, for example, was partly financed by european banks that bought mortgage - backed securities. the banking glut in advanced economies seems at least as important as the savings glut from asia. crisis accelerates the shift in balance of power in retrospect, we should have been aware of the risks. the world became more financialised than ever, as the size of financial sectors and capital flows grew strongly. history shows that these