doors to entirely new forms of use. with this in mind, the eurosystem is currently looking into the introduction of central bank digital currency, as part of its digital euro project. besides the other benefits offered by digital payments at the point of sale or when shopping online, customers can rest safe in the knowledge that their data is protected when paying with the digital euro. this is because the eurosystem has no commercial interest in the use of transaction data. the digital euro could be an option for digital person - to - person payments, too. in addition, the development of a new infrastructure opens up further opportunities. over the past few years, we have seen mounting demand for stablecoins and other crypto - assets. one reason for this could be that decentralised financial systems offer additional functions compared with normal bank accounts. smart contracts are one such example. these allow payments to be executed automatically as soon as predefined conditions are met. when it comes to developing a new payment infrastructure, thought and planning should go into such opportunities from the outset. we anticipate that any potential new platform that is developed will serve as a springboard for innovation. interoperability for cross - border payments between currency areas should also be a goal from the very start. in particular, the fact that many central banks around the world are currently considering the introduction of central bank digital currency opens up the prospect of tangible progress in this area. as you can see, the eurosystem has embarked on quite the undertaking with its digital euro project and we're investing a huge amount of time and energy into it. at the same 4 / 6 bis - central bankers'speeches time, however, central banks depend on cooperation with you – the payments experts. after all, central banks are not the kind of banks that provide accounts for everyone. according to the current legislation, the bundesbank wouldn't even be permitted to do so. and that is why the eurosystem is reliant on the tried - and - tested cooperation within the two - tier banking system. in this system, central banks, commercial banks and payment service providers each bring their own respective strengths to the table, to the benefit of all the parties involved. the central bank's role lies purely in providing an efficient, stable and secure payment infrastructure. commercial banks and payment service providers have direct contact with customers – they are the user interface. i know some voices have expressed fears that the central bank's footprint

companies in germany have also seen 3 / 5 bis central bankers'speeches sharp devaluations. these cases are exemplary of the transition risks i am talking about. and they prove that markets can respond well before the fact. what is important to recognise is that transition risks are not confined to companies operating in the production of fossil fuels or in the energy sector. other sectors, such as transportation, logistics, automotive, chemicals and heavy industry, which currently rely on fossil fuels or are energy - intensive, could be hit by transformation costs as well. but these second - and third - round effects are extremely complex and can currently only be quantified using equally complex assumptions. the exposure of the financial sector becomes apparent when, besides the direct investments in the industries in question, we take into account the tendency of insurers, pension funds and other investors to align their portfolios with capital market indices which often contain large portions of the industries that might be affected by the transition. and much like what we discussed in the case of physical risks, lenders are exposed due to reduced collateral values or the risk that their borrowers ’ once - profitable business models are not profitable anymore. to be fair, we also have to factor in the possibility that some green business models might not deliver the benefits and financial returns investors expect. transition risks will be less severe the sooner the transition begins and the more predictable it is. it ’ s a simple matter of fact that the longer governments wait, the more they will have to act later on to meet their targets. 5. the way forward we have identified two risk categories : physical risks that relate directly to climate change, and transition risks that relate to society ’ s response to it. at the beginning of my talk, i asked : are we currently underestimating these risks? i think we do. there is a difference between identifying risks, monitoring risks and managing risks. we may have identified the risks, but we don ’ t know how material they are. this needs to change, and in the remainder of my talk today i want to discuss how that can be done. for many reasons, understanding the risks i have talked about is inherently challenging. first, the developments we are facing stretch over the long term, and their outcome is uncertain ; second, historical data are of little use to predict them ; and, third, the whole process will be heavily influenced by policy decisions, which involves further uncertainty. another problem is that, typically, analysts don ’ t look