Jens Weidmann: Climate risks, financial markets and central banks' risk management

Speech by Dr Jens Weidmann, President of the Deutsche Bundesbank and Chair of the Board of Directors of the Bank for International Settlements, at the Green Swan 2021 Global Virtual Conference, 2 June 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

1 Introduction

Ladies and gentlemen,

It's a great pleasure for me to speak at the "Green Swan 2021" global virtual conference. Tackling the climate crisis is one of the greatest challenges of our time and requires changes throughout the economy. Its urgency increases with every minute that passes.

The economist John Kenneth Galbraith wrote: "In economics, unlike fiction and the theater, there is no harm in a premature disclosure of the plot: it is to see the changes just mentioned and others as an interlocked whole."

Since I am an economist, too, and neither a novelist nor a dramatist, there is no reason not to disclose the plot of my speech, all the more so as disclosure plays an important role in it.

First, I would like to give you, in my capacity as BIS Chairman of the Board of Directors, a brief overview of the BIS's activities in this field. Then I will explain why transparency matters when it comes to greening the financial system and managing climate change-related risks. And finally, I will elaborate on what a central bank, and specifically the Eurosystem, should do to protect its balance sheet from climate-related financial risks.

2 Greening the financial system – the role of the BIS

As regards the greening of the financial system and the support of central banks in addressing climate-related risks, the BIS has done pioneering work. Its climate change and green finance-related activities span a variety of business areas.

Its analytical work comprises conceptual considerations regarding the role of central banks as well as policy-oriented research output or statistics-related efforts. The latter means, for example, detecting and closing data gaps in the field of sustainable finance – an important task, which is carried out by the BIS's Irving Fisher Committee.