Press Briefing Climate change and central banks

Central banks are primarily tasked with managing Inflation and play a supervisory role, looking to ensure the stability of the banking system. Many also have other objectives, for example the Bank of England has a role in achieving net zero. 

While the need for central banks to consider climate change is recognised through the work of the Network for Greening the Financial System (NGFS), two approaches have emerged. 

A growing number of central banks – including the European Central Bank (ECB) – consider climate change is relevant to inflation management, but some central banks – led by the US Federal Reserve – take a narrower approach, focusing on financial risks. 

By analysing the ECB’s approach and its limitations, we can understand why central banks in general must act on climate change, and how they could become “green” allies for their governments. This is the goal of this briefing.