11.12.2019  Opening remarks Conference Climate Change. Challenges for the Financial System/Banco de España Margarita Delgado Deputy Governor  Good morning, Welcome to the Banco de España for this Conference, where we intend to take a look at the main challenges that climate change poses for the financial sector. The Conference takes place amid two intense weeks of the COP25, which is full of other interesting conferences and events. But I assure you that you won´t regret your decision to be with us today. The World Meteorological Organization certified last week that 2019 will close a decade of exceptional global warming, retreating ice and record sea levels, driven by greenhouse gases from human activities. 2019 is on course to become the second or third warmest year on record. The global average temperature in 2019 was about 1.1 degrees Celsius above the preindustrial period.1 The IPCC estimated that we could reach a temperature increase of 1.5oC between 2030 and 2052;2 but, given the latest evidence, this may actually occur sooner. There is now broad consensus that global warming above 2°C, relative to pre-industrial levels, would have significant economic and social consequences. The effects of climate change are widespread. It impacts directly on the environment, ecosystems and marine life, but it has also important implications in terms of human health, water resources, food production and migration. There is no time for procrastination. We need to accelerate the reduction of greenhouse gas emissions through the implementation of decisive and forceful climate policies, and we need to begin now.
We have indicated that we plan to shrink the balance sheet to the smallest size consistent with the efficient and effective conduct of monetary policy, and that, in the long run, the asset side of the balance sheet will consist primarily of Treasury securities.9 That’s our strategy, but its execution will depend on the operating framework of monetary policy, among other factors. Here, the Fed basically has two choices. We could return to a system similar in spirit to that used before the financial crisis, in which the supply of reserves in the banking system was kept relatively scarce, and the interest rate was set by adjusting reserves on a frequent basis through open market operations. Alternatively, we could continue with the system that we’ve been using since the crisis, in which bank reserves are abundant and the federal funds rate target is achieved through adjustments to administered rates. As I said, this approach is working very well at controlling interest rates and has proven to be easy to communicate and adaptable.10 The Fed will be looking closely at these options in the coming months and will subsequently make a decision on the future operating framework. And, as is our standard practice, we will be sure to communicate our thinking and decisions on this issue as soon and as thoroughly as practicable. Conclusion Monetary policy-making has perhaps never been more challenging than it was following the financial crisis.