next, i will discuss the need for public intervention to ensure an alignment of interests ( ii ). i / the financial sector and civil society are already mobilised. cf. moody ’ s, “ impact of carbon reduction policies is rising globally ”, march 2015. mark carney, “ breaking the tragedy of the horizon – climate change and financial stability ”, speech given at lloyd ’ s of london, 29 september 2015. bis central bankers ’ speeches this mobilisation, which has yielded progress, appears to have occurred in three main phases. first, the major public financial institutions were at the forefront of this movement. this is the case for the european bank for reconstruction and development or the caisse des depots, with its subsidiary cdc - climat. the european investment bank estimates that it currently grants 25 % of its loans – over eur 20 billion per year – to “ green ” projects. second, under the aegis of the united nations, projects were launched such as the unep finance initiative, a partnership between the united nations environment programme and 200 financial sector institutions, which make environmental sustainability a collective responsibility, share best practices and establish principles for green financing. thanks to the montreal climate change protocol, or to the portfolio decarbonization coalition, signatory investors commit to measuring and disclosing the carbon footprint of their portfolios. the objective is ambitious : reduce investment in carbon - intensive projects by several hundred billion dollars. lastly, financial institutions are now making more direct commitments. french banks and insurance companies have recently announced that they have withdrawn their support for the coal industry and increased their financing of renewable energies. paris europlace called for the creation of an energy transition fund, which would be invested in by french banks, insurers and asset management companies, and which could in turn invest eur 10 billion by 2020, with a view to financing projects to improve energy efficiency or promote renewable energies. this is a commendable initiative. ii / to best align these private initiatives with the fight against global warming, which is a public good, public intervention is nevertheless necessary. for central banks or prudential authorities, three questions arise : that of financing – and interaction with monetary policy –, that of information – and of disclosure –, and lastly that of time horizons – and stress tests –. 1. the question of financing : what interaction with monetary policy? climate change is likely to affect the price of goods and services. it has a direct impact on food prices

francois villeroy de galhau : climate change – the financial sector and pathways to 2°c speech by mr francois villeroy de galhau, governor of the bank of france, at the conference cop21, paris, 30 november 2015. * * * ladies and gentlemen, this conference organised by the 2°c initiative, the oxford martin school and france strategie for the opening of the cop21, is a major event in which i am delighted to participate. i would like to make some comments on a topic that has steadily gained ground in the climate change agenda, namely the way central banks and prudential authorities take account of climaterelated issues. this is in fact a relatively new question. we were already committed as both citizens and public policy - makers, but monetary and prudential authorities are today concerned by three broad categories of risk : – direct physical risks, related to the increase in both the frequency and the magnitude of extreme climatic events, which raise questions in terms of insurance costs. – liability risks, related to the financial impacts stemming from compensation requests from those who have suffered loss or damage due to climate change. – macroeconomic risks related to the transition between two production models, which can result in disorderly adjustments in sectors too heavily exposed to global warming or that become unviable due to the governments ’ climate change commitment. in practice, we already observe some financial imbalances in carbon - intensive industries facing rising costs, disruptive technologies, and regulatory uncertainties. 1 the market value of most carbon - intensive industries has already been impacted. and re - pricing may occur rapidly and abruptly. what is less clear at present is how we should react to such a development since the horizon at which climate change risks materialise largely exceeds the traditional horizon of most economic agents, and notably financial players. this is what mark carney famously referred to as the “ tragedy of the horizon ”. 2 we all agree that a higher carbon price would send the right economic signal. but we are aware of how difficult international decision - making is in this area. given my responsibility, and while awaiting such decisions, the following questions thus arise : how to ensure that investors and financial intermediaries are aware of their actual exposure to risks? and how to prevent a misallocation of capital to carbon - intensive sectors or stranded assets? to address these questions, i will start by stressing that, fortunately, the financial sector and civil society are already mobilised ( i ).