In a speech at the Green Swan Conference in Manila, Olaf Sleijpen of De Nederlandsche Bank, chair of the Network for Greening the Financial System, warned that the remaining carbon budget for limiting warming to 1.5 degrees Celsius is almost exhausted. He argued that faster emissions reductions remain essential to contain growing risks to monetary and financial stability, while climate adaptation should complement rather than replace mitigation. Weather-related events caused average annual direct damage of USD 384 billion globally over the past five years, more than double the level in the early 2000s, according to private reinsurers. An NGFS study for the Group of Seven found that extreme weather events were associated with gross domestic product losses of up to 57% and inflation increases of up to 17 percentage points in individual countries. Nature degradation presents a related economic threat because economies depend on ecosystem services, with surface water scarcity alone putting almost 15% of euro-area output at risk. Sleijpen noted that projected warming under current policies has declined to about 2.8 degrees Celsius by 2100 from as much as 3.5 degrees before the Paris Agreement, partly because renewable energy capacity has expanded and costs have fallen. However, he warned that delaying the transition would increase both transition costs and physical damage. The NGFS will support central banks and supervisors through economic data, climate scenarios covering long-term and three-to-five-year horizons, and practical recommendations for supervision, risk management, monetary policy and macroprudential policy, while governments retain responsibility for climate policy.

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