Remarks at United Nations Climate Ambition Summit 2023
Check against delivery.
We have seen good progress in the development of transition plans. However, many aspects remain unclear. That is why the Network for Greening the Financial System (NGFS) – of which I am the Vice Chair – is zooming in on this topic. The NGFS is a global coalition of almost 130 central banks and supervisors. We share best practices and promote methods of managing environmental and climate-related risks.
2 Transition plans
Transition plans can be a powerful tool. Let me give you a few examples. Corporates can use them to show their business case in a net-zero world. Investors can use them to assess whether a company is investable. Financial institutions can use them to align their lending with their own transition pathway. Going forward, supervisors might consider them when assessing whether or not financial institutions are addressing risks correctly.
3 NGFS Stocktake
The benefits of transition plans are clear. Yet we lack a common definition of what a transition plan should actually entail. Here are three key points from the NGFS stock-take:
- What does it mean exactly for a company to be transitioning – and where to?
- Credibility is needed – who can assure it, and how?
- Good data are key – do users of transition plan get them?
The NGFS is tackling all those aspects. Next year, we will provide an assessment: Are financial institutions getting the data they need to assess whether or not a company is transitioning? Yet we recognise that companies in developing and emerging economies face different trade-offs in the design and use of transition plans (mitigation vs. adaptation).
Transition plans should be part of a broader organisational strategy and firms’ risk management. With this in mind, I very much welcome the voluntary Principles presented by Secretary Yellen yesterday. They recognise transition plans right away in Principle 1. After all, it is in companies’ self-interest to perform a forward-looking and honest assessment.