Hon. Lucie Moncion: The financial sector recognizes the existence of black swans. Could you tell us about black swans that are specific to the environmental crisis?

Senator Galvez: Are you referring to the issue of greenwashing?

Senator Moncion: I am referring to environmental disasters that occur suddenly and were not expected. In the financial system, a black swan is an economic disaster that was not expected, such as the situation in 2008. We now speak of black swan events associated with climate change.

Senator Galvez: You reminded me that at some point we were talking about “unknown unknown” risks. We were talking about radical uncertainty. As an engineer, I know how to manage risk when we are able to measure it, model it, and predict it. That is what we do in engineering when we adapt our infrastructure.

The problem, financially speaking, is that according to experts, this risk is unknown. We cannot really measure it, because these factors are convergent, cumulative and exponential, and they are truly very difficult to predict. That is why experts are telling us that we must use microprudential and macroprudential approaches to ensure we can resolve the problem both on an individual entity level and on a systemic level, because the risk is systemic.