Frank Elderson: Sustainable finance - from "eureka!" to action
Keynote speech by Mr Frank Elderson, Member of the Executive Board of the European Central Bank and Vice-Chair of the Supervisory Board of the European Central Bank, at the Sustainable Finance Lab Symposium on Finance in Transition, Amsterdam, 4 October 2024.
The views expressed in this speech are those of the speaker and not the view of the BIS.
Many great discoveries have been made outside well-controlled laboratory environments. Alexander Fleming discovered penicillin when he returned from holiday and found mould growing on a Petri dish containing bacteria he was studying. Henri Becquerel discovered radioactivity by accident after he put the equipment he used to study the relationship between x-rays and sunlight in a drawer on an overcast day. And Archimedes famously had his "eureka" moment while sitting in a bathtub.
Not all "eureka" moments happen in well-controlled laboratory experiments, but laboratories nevertheless provide an ideal controlled environment to make major discoveries. To develop ideas, test theories and move from scientific findings to practical solutions for real-world problems. Laboratories provide the bridge from theory to practice, from discovery to application and from insight to action.
Eureka!
Back in 2017 a small group of central banks and supervisors from around the world shared an insight that was relatively novel to them and their peers: climate and nature-related risks are a source of financial risk. And this insight was as consequential as it was straightforward. If climate and nature-related risks are a source of financial risk, they fall squarely within the respective mandates of central banks and supervisors – to preserve price stability and ensure the safety and soundness of banks. In fact, if central banks and supervisors were to disregard climate and nature-related risks, they would run the risk of failing to deliver on their mandates.
This was a "eureka" moment for central banks and supervisors.