Intervene do Administrador do Banco de Portugal, Lus Laginha de Sousa, no Webinar da Euromed “What role for central banks in the crisis, from emergency decisions to green recovery? (apenas em francés)
I would like to start by greeting my colleagues from the Panel
I would also like to pay particular tribute to Sylvie Goulard.
I think we would all have appreciated to attend this event in person, not only because we were in Marseille, but also because it would have allowed Sylvie Goulard to be our host twice today, given that Sylvie is a native of the Marseillaise.
It is a great pleasure to participate in this panel, which will focus on parts of the climate and environmental agenda, while taking place at a time when we are less than two weeks away from COP-26, which we expect. you to excellent results.
One of the topics to be addressed today is necessarily what central banks and financial supervisors, in their role as public authorities acting according to their mandates, can do on the climate and environmental agenda that I have just mentioned.
Another topic is the key role that the financial system is called upon to play in mobilizing the trillions of private capital that will be needed over the next decades, certainly alongside public funding from governments and multilateral development banks. And certainly also in the context of an enabling framework that includes climate policy measures of various kinds and forms.
We must all keep in mind that without a vigorous integration of sustainable finance into the global financial system, it will not be possible to aim for success in the fight against what UN Secretary-General AntÃ³nio Guterres has called “Red code for humanity”.
I chose not to prepare any slides and to share some telegraphic views around three points.
Let me start with the first point which I would call “greening the recovery”.
I think we all agree that we would have preferred to live without the pandemic rather than face it. But since we failed to avoid it, the second worst thing we could do would be not to extract the full potential that the pandemic has revealed, including how we can reinvent the way we operate as a ‘individuals, as businesses, as public organizations or as a society.
This means that we must indeed seize the opportunity that surely presents recovery from the pandemic, something that we all hope to be on the horizon, as we were reminded in the previous session.
And calls to turn this recovery into a green recovery have grown stronger since the middle of last year.
Which is something remarkable in itself, as it signals the relevance that is attributed to green issues – and especially climate change – even when these issues receive overwhelming attention like Covid-19.
Very few global challenges have been able to stay in the spotlight during a pandemic, as the climate emergency has.
To ensure that the recovery is green, not only on the surface, but also in depth, it can never be overstated to say that it will be essential for governments – including central banks – to engage with the sector. financial, by making it aware of the criticality of climate change.
This is something that we have tried to do at Banco de Portugal, both by participating in common and wider platforms at national level as well as through our own awareness raising initiatives to disseminate information and knowledge.
In order to promote the âgreening of the recoveryâ and in addition to what I have said, it will also be essential to provide the financial sector with an enabling environment that will create new incentives to channel resources into green finance – or, on the other hand. a broader note, to sustainable finance, which includes blue finance, bridging finance and social finance.
In Europe, this largely involves the gradual reshaping of the European landscape of sustainable finance, with springboards underway such as the EU taxonomy, the European standard on green bonds or the proposal for a directive on corporate sustainability reports. Without forgetting the critical allocation to green and sustainable objectives of increasing shares in financial packages such as the next generation of the EU or the EIB budget.
My second point, is inevitable for someone who is in a central bank, and it is essentially to remind how central banks can make their offer in the climate crisis. It may seem a bit redundant at this point, especially to the audience that is with us today, but we have to keep in mind that there is still a long way to go, until topics like that climate change are fully integrated into the DNA of a central bank.
I will address this second point by focusing briefly on a few takeaways, based on the experience we have had so far at Banco de Portugal, dealing with issues of sustainability and climate change.
This experience has intensified over the past three and a half years and certainly cannot be fully summed up in these two takeaways.
But these two are the ones that I thought were potentially more interesting for today’s audience to distinguish.
I believe that central banks in general (and this was also the case with Banco de Portugal) are affected by climate change in all of our responsibilities and activities. This means that the impact can be felt not only in key areas of monetary policy and financial stability – including in the context of our participation in the euro area – but it can also be felt in our management of capital. , risk management, statistics and much more.
So my first conclusion is that it is useful for an institution, such as a central bank, to approach these different dimensions in an integrated way. This can be achieved by setting up internal coordination platforms, in order to promote coherent and articulated action, but without compromising the autonomy of each internal area.
Banco de Portugal took this approach at a very early stage, and it turned out to be a very important decision. This refined our strategic vision and allowed us to move faster and more efficiently through the learning curve.
My second conclusion is to highlight what can be an important lever for a central bank to contribute to the debate and subsequent action on climate issues.
Our mission at Banco de Portugal includes providing advice to the government on economic and financial matters, which also includes sustainable finance.
As such, we have had the opportunity to provide multiple contributions, which have not only shaped national initiatives, but have also resulted in relevant contributions to Portuguese positions on European and international forums.
Let’s move on to my third and last pointI’m going to touch on one thing we should try to avoid, as it risks becoming the lost child of the green debate.
Climate change is indeed an essential priority.
However, it’s not the only game in town – or, to be less provocative, other environmental emergencies are increasingly looming as well.
Some of them have links to climate change, but they can also be critical in themselves.
One of these cases is the loss of biodiversity.
It was considered the world’s fourth greatest risk in the World Economic Forum’s 2020 survey and its growing profile results from the intensification of several damaging factors.
Biodiversity loss not only contributes to climate change, but it also affects the ability of the ecosystem to provide a number of key services – and these are also essential from a strictly economic perspective.
If we take the example of pollination (and I am aware that it is very unusual for central banks to talk about pollination), it is one of those key services that is increasingly compromised and for which there is no suitable artificial proxy.
The estimated economic value of pollination is between 5% and 8% of the market value of global agricultural crops.
It is not difficult to identify the damage that could be caused if this service were to be interrupted.
If we multiply this example, by many other examples, we can easily conclude that the economic and financial analysis applied to assess the impact of biodiversity degradation has many similarities with the economic and financial analysis applied to assess the impact of climate change. And the link to financial stability is therefore also very clear, unless one pretends not to see it.
In conclusion, let me briefly mention the upcoming event that will perhaps shape the climate debate for a long time.
I am referring to COP-26, which has set itself great ambitions and will probably be the most significant step on climate and green issues since the Paris Agreement of 2015
At Banco de Portugal, we are firmly committed to doing our part in this global effort, and as part of that, we will be issuing a pledge on COP Finance Day – November 3. With this pledge, we reiterate our commitment to climate action and take it to the next level.
The motto âYes we canâ may have gone out of fashion, but it seems very apt when applied to the climate challenge.
Nevertheless, and finally, I can’t help saying that you have to be very careful if you try to verbally translate this bike into French, because it makes a big difference if instead of saying “Yes we can” we say “Yes a bit”.
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