2/5  BIS central bankers' speeches  Some have called on us to go further and incentivise change through imposing lower capital requirements for ‘green’ exposures and higher capital requirements for ‘non-green’ or carbonintensive exposures. As the prudential regulator, any incorporation of climate change into regulatory capital requirements would need to be grounded in robust data and be designed to support safety and soundness while avoiding unintended consequences or compromising our other objectives. In my view, the case for this has yet to be clearly established and possibly may never be. But our work to improve climate disclosures, scenario analysis, and risk management, could help unlock such assessments. Macroeconomy Beyond the financial system, achieving economy-wide net-zero emissions will require greening the way we heat our buildings, manufacture industrial goods like steel and cement, generate electricity and produce food. This could prove to be an opportunity for the economy to regenerate ageing capital and raise productivity. Analysis done by the Network for Greening the Financial System (NGFS) and National Institute for Economic and Social Research by 2050 suggests that such an orderly transition could lead to some increase in global GDP, and lower unemployment relative to prior trends. These positive effects should be larger in countries like the UK that are net importers of energy. However, as I mentioned earlier, much of that rests on how the transition proceeds. The lesson from previous episodes of structural change is that they never involve a frictionless re-allocation of capital.
(2021) estimates that $ of the $ of economic damage caused by Hurricane Sandy (New York, 2012) was attributable to climate change driven rises in sea-levels 7 See Chapter 6 of IMF Global Financial Stability Report 2020Opens in a new window 8 The Stern Review on the Economics of Climate ChangeOpens in a new window (2006) 9 4/5  BIS central bankers' speeches  9 See Government announcement of climate considerations being embedded across UK principal financial  regulatorsOpens in a new window 10 Dietrich, Müller, and Schoenle (2021) – ‘The Expectations Channel of Climate Change: Implications for Monetary  Policy’ 11 Monetary policy in the intangible economy - speech by Jonathan Haskel, University of Nottingham, February  2020 12 See ‘It’s not easy being green – but that shouldn’t stop us: how central banks can use their monetary policy  portfolios to support orderly transition to net zero’ speech by Andrew Hauser and Options for greening the Bank of England’s Corporate Bond Purchase Scheme discussion paper  5/5  BIS central bankers' speeches