Úvodné slovo guvernéra NBS na konferencii Climate and sustainability risks and opportunities

Never was the life of central bankers, businesses, and policy-makers as puzzling and challenging as it is today. The emergence of new structural challenges fundamentally changes the game for all of us.Climate change ranks among the most difficult and ones.

It’s 2021, it’s Christmas, and Netflix is releasing a long-awaited movie – Don’t look up. The stellar cast is secondary to the story. Two almost unknown astronomers discover a comet rushing towards Earth on a collision course.

But paradoxically, this is not the biggest problem. The primary concern is that only some people care. After all, warning and preparing humanity for a life extinction event is very annoying and laborious, and no one knows how to cope.

Sad as it may be, this work of fiction carries way too many similarities with our resolve to seek solutions to intensifying impacts of climate change on our lives and the economy.

As far as I recall, the most common response to climate change is the question, „What does that have to do with me, my business, and our policies“. Not so much today, but it can alter our way of life as we know it tomorrow.

Many ask whether the consequences of climate change are that ultimate and worrisome.

The simple answer to this – Yes, they are.

We are beginning to experience it more and more intensely at home, in the country we know best. No other country has, compared to its size, as many mineral springs as Slovakia, water-rich for centuries – and yet we suffer from droughts.

In January, the Slovak Hydrometeorological Institute published a report on the last year’s drought in Slovakia.

„The year 2022 was exceptional in terms of drought occurrence in Slovakia. Arid conditions occurred in more than half of the country, and the drought duration in some places was more than 200 days. In most districts in Slovakia, the harvest was meagre, and the drought significantly affected forest ecosystems.“

Let’s rewind and look at what all this has to do with central bankers.

The role of a central bank is not to pivot. It’s primarily up to the governments, academia, innovators and businesses. They are the first line of defense.

Our role is more of a facilitator, and we’re enablers.

Still. How does it all relate to the financial sector’s stability, sustainability and resilience of the financial system, policy-makers, businesses, and us?

The topic of today’s conference is Sustainability opportunities and risks in the context of the impacts of climate change.

Since childhood, all of us have been indoctrinated and guided by our parents not to put off until tomorrow what can be done and fixed today. A wise, often annoying principle. Nevertheless, well on the spot.

The devil’s advocate would raise a hand and remind me that future generations will be more innovative and have enhanced and cutting-edge technologies dwarfing today’s capabilities. As a result, they will be able to solve problems insurmountable for us today.

Sure, but it can be too late. It’s called the tragedy of the time horizon.

The National bank of Slovakia, the ECB and other central banks and supervisors from around the world can and will play its part and help the change to happen … within our mandates.

Rigorous analyses will be a crucial tool and we have a platform for that, the NGFS.

NGFS has developed a typical picture of what our economies might look like under different assumptions, together with leading academic climate institutions. These are called „climate scenarios“.

We’re starting to better understand risks related to the green transition; we can now identify physical and macro-financial risks.

These climate scenarios can help policy-makers, financial institutions, businesses and the public to deal with the uncertainty ahead.

We can’t fix everything today; we won’t and don’t need to. So we need to stay agile but realistic. The last thing is to overburden, to over-regulate the financial system and do more harm than damage.

There are five things for us to do:

• to help to steer the public debate,
• to drive collaboration among the central banks, market supervisors, here the NGFS is vital,
• to assist financial institutions with the transition,
• invest in data collection, quality and granularity of data, analyse them and create scenarios
• enhance our models and forecasting to understand climate change impacts on inflation better.

All this is doable and already in motion. I am optimistic that together we can manage even these challenges.

Allow me to conclude with a quote by Albert Comus “Real generosity toward the future lies in giving all to the present.”

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Úvodné slovo guvernéra NBS Petra Kažímíra na konferencii Climate and sustainability risks and opportunities, 7.2.2023