But others might argue that the structural changes of the eighties and nineties which were consistent with an appreciating real rate because of much more rapid productivity gains in the tradable than in the non-tradable sectors, cannot be repeated, so that the assumption of a continuing secular uptrend is invalid. On that view, the net appreciation over the past couple of years may be deemed to have dragged us away from our preferred path. It is hard to judge where the proper balance of these views lies. I recall how, 15-20 years ago, the doom merchants were prophesying the end of Hong Kong’s long run of growth because we were rapidly losing competitiveness in much of manufacturing. Presumably they did not 1  Slides are not included in this text document. 1  BIS Review 54/1999  foresee the remarkable extent to which the service sector would develop as an alternative wealth-generating lynchpin of the economy. Now, the next generation of doom merchants is prophesying imminent disaster as competitiveness in certain parts of the service sector appears to have been eroded. Will they be wrong again? Have they failed to appreciate the true workings of the market economy and comparative advantage? Do they not realise how difficult it is to foretell exactly how an economy will evolve, even though the evolution is taking place right under our noses?
Conclusion A market in the transition to a net zero world is being built. It will reveal how the valuations of companies could change over time as climate policies adapt and carbon intensity declines. It will expose the likely future costs of doing business, of paying for emissions, and of tighter regulation. It will help smooth price adjustments as society’s opinions and government policies change. As countries build their policy track records and their credibility grows, the financial system will amplify the impact of those policies and pull forward adjustment to the net zero carbon future, Consistent with the ambitions of America’s Pledge, the next year will be critical to mainstreaming sustainable finance. 4  All speeches are available online at www.bankofengland.co.uk/news/speeches  4