ECB’s Makhlouf: Economic Risks of Climate Change Evident, Need Global Response

19 July 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Gabriel Makhlouf on Tuesday spoke out in favour of a global response to the threat posed to economies by climate change.

In a speech at the Frankfurt Chamber of Commerce and Industry, Makhlouf, who heads the Central Bank of Ireland, said that the economic risks of climate change were by now clear to all, but that ‘understanding this is the easy part.’

‘Developing, implementing and enforcing a new climate and sustainable financial regulation framework is where the focus needs to be’, he said. ‘Policymakers and supervisory authorities have an important role to play in ensuring that the integration of climate issues into regulatory frameworks is effective, and credible across sectors and markets.’

The response should be at the global level, he urged, adding that economic models needed to take into account the ramifications of climate change.

Speaking more generally, Makhlouf, who avoided issues of monetary policy on account of the blackout period on related comments, said that the financial services industry was undergoing a sea change, citing digitalisation in particular.

‘The speed and scale of change presents both opportunities and risks’, he said.

‘The traditional banking model continues to dominate’, he said. ‘But the ability of incumbents to develop solutions based on rapidly-changing consumer expectations depends upon transformation of their legacy IT and wider infrastructure.’

After declaring himself fundamentally optimistic during the Q&A, Makhlouf was asked by Bundesbank President Joachim Nagel, also in attendance, how he had remained so after the Russian invasion of Ukraine.

‘I can’t see it ending quickly’, Makhlouf said of the conflict, which he noted had lasted longer than he and most had expected and which he predicted was ‘going to get worse before it gets better.’

‘I think the war will somehow be fixed, be resolved’, he said, conceding that the how was an open question.

Still, he said, ‘economic activity continues’ and ‘technology is continuing to develop, it hasn’t stopped.’

‘I don’t see technology going into reverse’, he said.