as for all those in positions of responsibility in this country, there is one topic that is becoming more and more important : the transition to a climate - neutral economy. the urgency and significance of this issue is now clear, especially after this past summer, which saw the most sunshine since records began [ in 1881 ], with temperatures well above average and considerable drought. “ heißzeit ”, or “ hot age ”, playing on the german for “ ice age ”, was the german word of the year in 2018 – and, unfortunately, it has not lost any of its relevance in 2022. the transition to a climate - neutral economy is urgently needed. furthermore, this would help to free germany from its crippling dependence on russian gas – another reason to press ahead with full force. savings banks are helping to fund this transition. after all, it is not least bank loans that allow the many small and medium - sized enterprises in germany to be part of the green transition. however, the savings banks group has also identified a number of other ways in which it can play a part. these are set out in its “ commitment by german savings banks to climate - friendly and sustainable business practices ”. by early august, more than 230 savings banks and 14 affiliated institutions had signed up to this commitment. i hope that many more institutions will add their signatures, too. the german savings banks association should support its members in upholding this commitment as well as systematically and successfully managing the associated risks. however, not only savings banks, but also other banks as well as central banks have been paying greater attention to climate and sustainability risks for some time now. with regard to the climate, there are two very different types of risk involved here. first, there are the risks arising from the direct, physical repercussions of climate change – from the banks ’ perspective, these could be risks associated with real estate financing in areas facing a greater threat from flooding. however, there are also risks resulting from urgently needed climate policies and structural change towards climate neutrality. at its core, it is about ensuring that the costs of greenhouse gas emissions are no longer borne by society as a whole, but by the emitters themselves. this may make certain business models unprofitable and sooner or later lower the value of those enterprises ’ shares or bonds. this means that climate risks are financial risks, too. they need to be made transparent on financial institutions ’ balance sheets, and this is what we as supervisors

, we reported on the climate impact of our own euro - denominated non - monetary policy portfolio. this includes funds that we invest as a counterpart to the bank ’ s capital, statutory reserves, and long - term provisions for civil servant pensions and healthcare assistance. at the same time, we are committed to improving the available data at both the national and international levels. bot t e at o a a d te at o a e e s and the eurosystem is now also accounting for climate aspects in its monetary policy operations. as of october, climate - based “ tilting ” will be applied to purchases of corporate bonds. if bond issuers perform comparatively poorly in terms of greenhouse gas emissions, decarbonisation targets and climate - related reporting, their bonds will be purchased in smaller volumes. however, there is no doubt that the volume of corporate bonds purchased will be determined by monetary policy considerations. after all, our primary objective is price stability in the euro area. furthermore, in the long term, and in line with the aforementioned eu ( european union ) corporate sustainability reporting directive, only bonds issued by enterprises that disclose climate - related information will be allowed into the collateral pool. transparency standards will also have important effects for markets. for example, they will allow financial markets to more easily price in climate issues, long - term financing risks, and potential returns. it will then be possible for prices and asset returns to better reflect climate effects. and this promotes the efficient allocation of capital. there is no question that both financial institutions and central banks must take action to tackle climate - related financial risks as well as be more transparent about them. i am absolutely certain of this. 4 financial institutions and their profitability meanwhile, savings banks and banks also face other challenges. at present, they must be vigilant in various areas. i would like to briefly discuss three of the challenges that they face. first, the interest rate reversal. in the medium term, higher interest rates are likely to buoy institutions ’ earnings. in the short term, however, the interest rate reversal is also hurting some institutions. second, russia ’ s war of aggression against ukraine and all its consequences. the war has severely dampened the outlook for the economy and considerably increased uncertainty. for financial institutions, this means that credit risk could materialise. and this would result in corresponding write - downs and weigh on profitability. third, from march to june of this year, we have seen a sharp decline in inflows