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Klaus SchwabFounder and Executive Chairman, World Economic Forum
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Christine LagardePresident, European Central Bank
Christine Lagarde on how to address COVID-19, climate change and inequality
Lagarde: At the ECB, we have now wrapped up and concluded our strategy review, which was the first one in 17 years. And I was blessed to have an entire Governing Council unanimously agree that the fight against climate change should be one of the considerations that we take when we determine monetary policy.
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Schwab: My question would be, what can institutions like the ECB and also central banks do to make monetary policy really contribute to a healthier life and wholesome planet?
And actually, what would be the implications of the fight against climate change and preserving nature and biodiversity for our economic model? Many people are afraid it costs us, and it comes with a reduction of our lifestyle and our quality of life. Can we combine the drive towards a green economy with economic cost?
Lagarde: Can we arrive at that trade-off between fighting climate change, preserving biodiversity and yet securing enough growth to respond to legitimate demands of the population? And my first answer, Klaus, to be firm, is that to have a way of life, we need life. And in the medium term, we do have major threats on the horizon that could cause the death of hundreds of thousands of people.
So we have to think life, first. We have to think way of life, second. How can we come together to make sure that we secure the first priority, which is life, and also protect the way of life that people have? And make sure that the cost of it is not so high for some people, that they just cannot tolerate it. I think that the trade-off that we reach will probably require some redistribution, because it is clear that the most exposed people, the less privileged people are those that are going to need some help.
The Federal Reserve Takes Climate Change Seriously
Activists need to recognize the political constraints the central bank faces.
Excerpt: Powell and the Fed’s Board of Governors created two new entities — the Financial Stability Climate Committee, to focus on the broader financial system, and the Supervision Climate Committee, to focus on individual institutions. This matters, because it means top officials are committed to regularly evaluating and responding to the threat. They’re already working to ensure that banks embed climate change in their business decisions – analyzing exposures, identifying concentrations of risk and considering how to manage them over time.
ECB President Christine Lagarde said policy makers will inject climate-change considerations into asset purchases and broader monetary policy. They’ll also draw up a framework for how to weigh the issue against more traditional questions about how to manage the economy and banking system.
The move reflects efforts by central banks from the U.K. to China to steer investors toward backing projects with a lower pollution footprint and considering the long-term risks that they incur through support for industries that are causing the most damage to the environment. Their work, backed by Lagarde and dozens of other central bank chiefs, has given a lift to the sustainable investments business and to groups pressing for financiers to choke off funding for the most damaging technologies.