The role of central banks in combating climate change and developing sustainable finance

Abstract

The consequences of climate change affect both the financial system and the economy as a whole. Understanding the attendant risks and meeting the goals of the Paris Agreement, so as to restrict the rise in global temperature and mobilise the resources needed to achieve a carbon-neutral economy, is a global challenge for the political and economic authorities. International cooperation is also a must. Central banks are not impervious to these movements and are including on their agendas climate and sustainability-related aspects in various areas, both in the management of own portfolios and in supervision and financial stability. And it is also being discussed how to include these aspects in monetary policy frameworks. While the central role in this arena is, given their nature, for governments, central banks may have an important role as catalysts, leading by example to contribute to achieving the goals of the Paris Agreement. In Europe, the European Central Bank (ECB) and the National Central Banks (NCBs), including the Banco de España, are working to incorporate these matters into their own business areas.