Live blog: Green Swan Conference (day two)

June 3, 2021|Written by Graham Caswell

Live coverage of the second day of the Green Swan Conference, debating how the financial sector can take immediate action against climate change-related risks.

Our coverage of day one of the conference can be found here, and day three here. Civil society proposals to the conference can be found here.



15:45 CEST: Nobel Laureate Joseph Stiglitz on policy credibility and expectations
16:45 CEST: NGFS chair Frank Elderson on two “epistemological breaks”
18:00 CEST: Former Fed governor Sarah Bloom Raskin on the precautionary imperative
18:30 CEST: Governor Andrew Bailey shares the BoE’s experience of climate risk strategies


13:00 CEST

Today, Banque de France Deputy Governor Sylvie Goulard will start us off at 13:00 CEST, followed by a speech from former Italian prime minister Mario Monti. We’re also looking forward to hearing from Columbia University professor Joseph Stiglitz, ECB board member and NGFS chair Frank Elderson, and former Fed governor Sarah Bloom Raskin.

Current Bank of England governor Andrew Bailey will end the day with a speech called Tackling Climate Change for Real: Progress and Next Steps, which appears to be a follow-on from his Monday speech to the Reuters Responsible Business event. Of course, the day will also be packed with panel discussions and civil society commentary.

We’ll be covering it all live here on Thank you for joining us!

14:00 CEST

Following a brief recap and overview of the conference so far (and the BIS Green Swan report), Banque de France Deputy Governor Sylvie Goulard briefly looked at three important questions that will set the tone for today’s events:

  1. Should we focus only on climate change, or broaden the scope to other environmental issues?
  2. How can we make sure that public policies relating to climate are coherent and coordinated?
  3. How can we thrive within limits?

Goulard then introduced the first guest speaker of the day, former Italian prime minister and European Commissioner Mario Monti.

As Italian PM during the European debt crisis which followed the 2008 financial crash, Monti has experience with unexpected crisis. He acknowledged he was new to comprehending the significance of climate change, and did not immediately recognise the importance of then BoE governor Mark Carney’s seminal Tragedy of the Horizon speech in 2015. Monti’s awareness of the climate crisis has evolved since then, and he expressed great appreciation for the work of Carney and so many others in their attempts to make finance sustainable.

In a talk that contained much reminiscence of an extraordinary career, Monti talked at length about the current crisis of the Covid-19 pandemic. Expansive and ambitious, he called for a G20 global health board to provide high-level political coordination to complement the work of the WHO and other organisations and integrate politics into global public health.

15:45 CEST

Nobel Laureate and influential economist Joseph Stiglitz has delivered a powerful speech, emphasising that policy stability and credibility is crucial to managing the expectations of financial actors.

If policies are not credible they will not trigger the reallocation of capital to a new equilibrium compatible with a net-zero economy, he said, suggesting that current financial policy frameworks may undermine credibility. It is also vital to include expectations in climate-related scenario analysis and stress testing.

Stiglitz contrasted the 2008 financial crisis with the current climate crisis. The 2008 crisis originated with mis-priced mortgage risks in a small part of the financial system, the US sub-prime mortgage market. In contrast, the climate crisis is much bigger and more important. Stiglitz focused on fossil fuel companies, saying they are a clear and potentially systemic transition risk which is a present danger to financial stability today. Physical climate risks are also manifesting, he said, pointing to the 1.5% of US GDP that climate-related events cost the US economy last year.

Financial regulators and central bankers have a particularly important role in managing systemic risks, including climate change, said Stiglitz, adding to calls for mandatory climate risk assessment for financial firms.

Without the appropriate allocation of capital we have no chance of meeting our climate targets, he concluded. Climate change is a new lens central bankers and regulators must see through, he said. And if they fail, humanity cannot reach its climate targets.

16:45 CEST

Although Dutch central banker Frank Elderson is a member of the ECB’s executive board and governing council, he made clear his remarks were given solely in his role as founding and current chair of the Network for Greening the Financial System (NGFS). His detailed speech gave an overview of NGFS activities in the context of the green swan risks that climate change poses to the financial system.

Referring to former BoE governor’s pivotal Tragedy of the Horizon speech, Elderson said that “we must acknowledge that the horizon is now. The tide is truly turning towards action, and the flow is gathering force.” The green finance landscape is clearly becoming crowded, and this is clearly welcome – but this crowded landscape needs to be coordinated.

Elderson organised his remarks around two important “epistemological breaks” – two new ways of thinking or two paths to recognising the climate threat for what it is, and acting accordingly.

The first involves changes to traditional past-based risk analysis and management practices, which are not appropriate for managing the unique novelty, scale, and uncertainty of climate-related risk. Instead the forward-looking approach of scenario analysis in risk management is necessary, Elderson said. The NGFS is working towards a common and consistant framework for foward-looking risk management, he said, and will release an updated report shortly.

But the conclusions are already clear: Better data does not mean more data, and we don’t need to wait in order to act.

Elderson’s second epistemological break is that central bankers and supervisors must be more active to fulfill their existing mandates. Climate change and biodiversity loss are clearly systemic financial risks, and regulators have a duty to mitigate them. There’s also a legal risk of being sued for failing to act, he said. Central banks and supervisors can become exposed to this risk, with consequent effects on the financial system.

Setting expectations in an extremely important step, Elderson said, echoing earlier comments from Joseph Stiglitz. Green monetary policy is also needed, he said, and “the full NGFS” has rallied behind the idea that climate change is a matter for monetary policy operations.

“We must show resolve,” Elderson concluded. The cataclysmic and irreversible risks of climate change means that cleaning up after the crisis is not an option. That risk can only be mitigated. Acting on climate change is fully consistent with central bank mandates to ensure price and financial stability, he said, and “the headwinds are turning into tail winds”.

He ended with an appeal to no longer associate the horizon for climate risk and action with a tragedy. “The horizon is now,” he repeated. “Let us embrace it.”

The full text of Elderson’s speech is available here.

18:00 CEST

Sarah Bloom Raskin is former member of the Board of Governors of the US Fed and a former deputy secretary of the US Treasury. Speaking on climate change and the precautionary imperative, she emphasised that we are navigating between climate catastrophe on one hand, and a sustainable and net-zero economy on the other. Market forces are not equipped to manage this transition, she said, and financial firms need regulation to help them steer. This requires the adoption of a precautionary approach from central banks and financial supervisors.

“Our collective well-being is at risk from serious disruption from climate change,” Raskin said. Pointing to the 2008 crash, the US savings and loan crisis, and other market failures, she said that corrective measures came after the event, and not before. Markets alone cannot internalise the substantial and growing costs of climate change, she said.

In a clear reference to the Three Horizons model of transformational change, Raskin used the metaphor of two ocean currents that meet off the coast of British Colombia, requiring careful navigation between them. One current represents the present unsustainable path to climate catastrophe, while the other represents a safe and sustainable future. Financial firms are currently navigating between the two, she said, and regulation represents the rudder necessary to steer through this transition.

The default assumption of US and other regulators is that the transition to net zero will be smooth, but this is a strategy of taking one’s hand off the rudder, she said. “We are likely to see abrupt and sudden shocks” under such assumptions, she said, leading to a “crazy ride”. Central banks need to prepare for shocks from the rapid devaluation of fossil fuel companies, she concluded, especially as fossil fuels from those companies may still be needed as the transition occurs.

18:30 CEST

Bank of England Governor Andrew Bailey concluded today’s events by outlining the bank’s efforts to identify and manage climate risks in the UK financial system. In a speech on the progress and next steps in tackling climate change for real, Bailey called for governments to price carbon and for financial regulators to mandate climate-related financial disclosure.

Bailey focused on the reality of reducing climate risk assessment to coherent, consistent and accurate practices that can be implemented by financial institutions and other large companies. Referring to the BoE’s pioneering climate-related disclosures last year, he said that the most challenging part of the exercise was assessing the climate impact of the bank’s corporate bond portfolio. Bailey committed the BoE to eliminate carbon from its own operations by 2050, and preferably before.

Bailey also reviewed the BoE’s strategy in greening its corporate bond holdings, now open to public consultation. The bank will seek to incentivise companies to reduce emissions and mitigate climate-related risk, he said, and will seek to influence larger investors. Climate-related eligibility criteria for corporate purchases will also tighten over time.

Overall, Bailey’s contribution was practical and detailed, sharing the BoE’s pioneering experience in developing and implementing climate risk and mitigation strategies. Many of his points reflected those made in an earlier speech given on Monday to a Reuters Responsible Business event.


That concludes coverage of day two of the Green Swan Conference. Our coverage of day one of the conference can be found here, and day three here.


This page was last updated June 9, 2021

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