, and by raising awareness on the consequences of climate change. the role of central banks for central banks climate change has been primarily an issue of financial stability and of resilience of financial institutions. the market has not been pricing climate environmental risks appropriately. thus, capital can be stuck in activities which over time will be subject to a potentially severe loss of value. this means that we, central banks and supervisors, have to make sure that financial risk related to climate change or environmental degradation is adequately accounted for and priced by the financial sector. 1 / 3 bis central bankers'speeches what can central banks do? on the risk mitigation side, we can support the design of appropriate tools such as proper disclosure and transparency and also have a forward looking approach, especially given that historical data may not be a good predictor of future risks. here is where scenario analysis comes in, as it helps us understand how climate risks will impact the financial system over say 10 - to 20 - year time horizons. this is a complex task because today most central banks and financial supervisors do not have the necessary tools and we need to have more specialized human resources in this field. our actions can definitely complement but do not substitute an integral climate / environmental policy. it is thus for policy makers to contribute by supporting the necessary transitions in the real economy and internalize the existing environmental / climate externalities. this has proven to be difficult but not less important. ngfs members are trying to lead by example. in this regard, unep fi with the close collaboration of banco de mexico launched an in depth study with individual interviews to evaluate, among other issues, the degree of awareness of mexican financial institutions regarding climate / environmental and social related risks ; and if financial institutions are equipped to assess and manage these risks. this exercise represents an important step in the direction of engaging mexican financial institutions to incorporate environmental and social risks into mainstream risk strategy, and to capitalize the market opportunities that result from the transition to a low carbon economy. also, the recently published ngfs handbook on central bank portfolios management, which has a section on banco de mexico, shows that there is a growing commitment among central banks to incorporate sustainable responsible investment ( sri ) practices. sri objectives are aligned with banco de mexico values. these are to promote social interest, transparency, caring of the environment, and ethical commitment. as such, banco de mexico has incorporated sri considerations within the fixed income holdings in its own portfolios, including debt issued by supranation

regarding the definition of a green loan taxonomy, giz from germany is financing a study that is developing a green loan taxonomy for the banking sector in mexico, using as a benchmark the taxonomy derived from the european union sustainable finance action plan. in order for the banking sector to start reporting on this effort by 2020, an interim less complex proposal than the european will be tested by some members of the mexican banks association during the first quarter of 2020. a green loan taxonomy is expected to be issued by 2021. we also need to advance in the definition of a taxonomy on green funds, which are strongly in demand by young environmental / climate conscious millennials. starting in 2020, consar will require afores to include mandatory environmental, social and governance ( esg ) metrics in their risk and investment process. we must also make sure that reporting and disclosing green information is accurate and verifiable by third parties. in the future, certifiers and second opinion providers will use the green taxonomy to verify against green activities more than to interpret what is green or not. also we can incentivize environmental and socially responsible behavior of economic actors by looking at new ways to include climate / environmental information that is materially relevant into the risk analysis of credit institutions. such information could be collected by credit bureaus and be part of their data bases thus enriching the information these entities provide to the market. ladies and gentlemen : as i have said previously, greening the financial system is a topic highly relevant for banco de mexico. the development of more standardized methodologies and criteria for assessing environmental risks, as well as of green and sustainable investment instruments, can contribute to a turnaround in the allocation of economic resources to longer - term activities and projects that are consistent with greater social and inter - generational benefits. for banco de mexico, incorporating a better climate change risk assessment is crucial to promote the stability of the financial system and to foster its efficiency and transparency. this is why banco de mexico ratifies its interest in promoting a dialogue with other central banks, supervisors, academia and experts. i am sure that this conference that focuses both on recent research on these topics as well as financial policy is producing valuable ideas and lines of action for our common objective of greening the financial system. thank you very much and welcome again to our venue. 3 / 3 bis central bankers'speeches