Sunday, 11 May 2025
No Result
View All Result
eudebates.tv
  • EU Policies
  • World
  • Special Debates
  • Events
  • Vote & Polls
eudebates.tv
No Result
View All Result

EU role of central banks in combating climate change

EUdebates Team by EUdebates Team
26/01/2021
in Economy
Reading Time: 6 mins read
0
ECB-Eurotower European Central Bank, Frankfurt am Main, Germany
136
SHARES
1.4k
VIEWS
Share on FacebookShare on Twitter
ADVERTISEMENT

Join EU debates

Eurogroup: Inflation pressure is temporary but economic recovery on hold

How the pandemic caused global economic crisis and changed the world

No winners but fewer losers in global economy from COVID than expected

Strengthening the EU currency and the international role of the euro

Lagarde wants to make ECB a climate change pioneer and give a new role to European central banks to think green, considering climate risk. Climate change is one of the greatest challenges faced by mankind this century. There is now broad agreement that ECB should act. But that agreement needs to be translated more urgently into concrete measures. The ECB will contribute to this effort within its mandate, acting in tandem with those responsible for climate policy.

Unlike the mice in the fable, not only do we have to recognise that we cannot keep waiting for someone else to act. ECB also recognise that the burden cannot fall on one party alone. There is no single panacea for climate change, and combating it requires rapid progress along several dimensions. Relying on just one solution, or on one party, will not be enough to avoid a climate catastrophe. And here we can actually learn something from mice, Christine Lagarde said. As the Roman playwright Plautus wrote, “How wise a beast is the little mouse, who never entrusts its safety to only one hole”.

ECB a climate change pioneer

ECB President Christine Lagarde

Christine Lagarde wants to make ECB a climate change pioneer. ECB should think green when designs policies and considers climate risk when buying assets or accepting them as collateral. The ECB said on Monday it will dedicate a team of 10 bank employees, reporting directly to President, to set the central bank’s agenda on climate-related topics.

“Climate change can create short-term volatility in output and inflation through extreme weather events, and if left unaddressed can have long-lasting effects on growth and inflation,” Christine Lagarde said.

➡️ We’re opening a new climate change centre. The climate change centre will shape and steer our climate agenda internally and externally 2/4 https://t.co/WchUWPs3Wq

— Christine Lagarde (@Lagarde) January 25, 2021

Dealing with climate-related risks

Dr Jens Weidmann, President of the Deutsche Bundesbank eu debates the role of central banks play in combating climate change. He gave a great speech at the ILF Online-Conference “Green Banking and Green Central Banking: What are the right concepts?” in Goethe University Frankfurt.

Some would like to see central banks in a similar role. In their view, not only are we supposed to ensure price stability, help with supervising banks and safeguarding financial stability, foster growth or promote employment. Some also expect central banks to act as a rapid response unit for every economic crisis. Act to keep sovereign financing costs low or provide savers with adequate interest rates. Recently, another item has been added to the wish list. Central banks are being called upon to assume an active role in climate policy.

Bundesbank President Jens #Weidmann talks about the role for central banks in combating climate change at the ILF Online-Conference https://t.co/ULYVTRfjn7 #GreenBankingGreenCentralBanking #greenfinance #sustainablefinance @ilf_ffm @goetheuni pic.twitter.com/MoIMmPy9ey

— Deutsche Bundesbank (@bundesbank) January 25, 2021

One thing is clear: climate change presents a challenge for all of humanity. The Swiss playwright Friedrich Dürrenmatt wrote in an appendix to his play The Physicists: “What concerns everybody can only be solved by everybody.” Therefore, every institution is right to ask itself what contribution it can make to mitigating climate change within the remit of its mandate.

The mandates of central banks

The mandates of central banks and financial supervisors vary. They typically include price stability, financial stability and the soundness of financial institutions. Climate change and climate policies can affect all of these mandates. They may have an impact on macroeconomic and financial variables such as output, inflation, interest rates and asset prices, while altering the underlying structure of our economies. It is therefore essential for central banks to gain a full understanding of these repercussions for the functioning of the economy and the financial system.

We need to embed climate-related developments and risks in our analyses and update our analytical and forecasting toolkits accordingly.

Dr Jens Weidmann, President of the Deutsche Bundesbank

Regarding the impact on the financial system and the economy, climate change entails both physical and transition risks. First, physical risks result from persistent changes in climate and more frequent extreme weather events. Goethe himself experienced first-hand the enormous impact extreme weather can have. In his day, this was caused by a volcanic eruption far away on an Indonesian island. The year 1816 went down in history as the “Year Without a Summer”. People suffered from the cold and from persistent rain; crops failed and famine broke out. Second, transition risks relate to the process of adjustment towards a lower-carbon economy.

Central banks are not commercial banks

Both the physical impact of climate change and the transition to a less carbon-intensive economy can be a source of financial risk. For example, the ECB found in a sample of euro area banks that the exposures to the twenty largest emitters of carbon account for 20% of total large exposures. Central banks are not commercial banks. But financial assets can be just as exposed to financial risk as those of commercial banks. In this regard, central banks should practise what they preach.

The significance of climate change for the Bundesbank’s tasks

Clearly, it is in every market participant’s interest to properly protect themselves against climate-related financial risks by adjusting their risk management accordingly. Thus, first and foremost, it’s up to the financial sector to recognise and take into account such risks. Whether and how this is done has a bearing on several of our tasks as a central bank.

Every new beginning is difficult. But, to echo the king in Lewis Carroll’s “Alice in Wonderland”, we have to “Begin at the beginning.” According to a survey conducted by the ECB and the EBA, only a small number of institutions have fully incorporated climate-related risks into their risk management framework already.

What role should central banks play in combating climate change?

eudebates banking and climate change

Share this debate with your friends!
Follow #eudebates on Google News and on Facebook
Tags: Banking SupervisionBanking UnionBanksChristine LagardeclimateClimate Changeclimate neutralityCrisisDeutsche BankECBEconomic CrisisEconomic GovernanceEconomic Governance EuropeEuropean Central BankEuropean Green DealEuropean Investment BankFINANCEFinance and bankingfinancial managementFinancial Supervisory AuthorityGlobal BankingGreen DealRestoring Economic GrowthWorld Bank
Share54Tweet34

Related EU debates

Christine Lagarde, President of the European Central Bank with Eurogroup President Paschal Donohoe
Economy

Eurogroup: Inflation pressure is temporary but economic recovery on hold

22/05/2021
Economy EU-Budget
Economy

How the pandemic caused global economic crisis and changed the world

13/05/2021
Containers Imports Exports Trade harbor
Economy

No winners but fewer losers in global economy from COVID than expected

01/04/2021
500 euros money printing
Economy

Strengthening the EU currency and the international role of the euro

25/03/2021
Money Invest Green
Economy

InvestEU programme adopted for strategic and innovative investments

15/03/2021
sustainability Green Climate policy
Economy

ECB Green monetary policy and Climate change

14/03/2021

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

SOTEU 2022 - State of the Union speech

Watch State of the Union live: Ursula von der Leyen gives 2022 address #SOTEU

14/09/2022
Volunteers preparing food for Ukrainian refugees arriving at Berlin Central Station

EU steps up solidarity with refugees fleeing Ukraine

08/03/2022
pump jack oil diesel

REPowerEU to get rid of the dependencies of Russian fossil fuel

08/03/2022
Ursula von der Leyen President of the European Commission

EU sanctions against Russia following the invasion of Ukraine

26/02/2022
Finnish PM Sanna Marin

Finland: NATO membership ‘will change’ after Russian invasion

24/02/2022
NATO - EU joint Press Conference

EU responds to Russia’s invasion of Ukraine with massive sanctions

24/02/2022
  • Social Media Facebook twitter

    DeleteFacebook? What is the best Facebook european alternative?

    268 shares
    Share 107 Tweet 67
  • Travelling in Europe with COVID19 country colour travel code zones

    238 shares
    Share 95 Tweet 60
  • Why don’t Mediterranean boat migrants take the plane? Why don’t refugees fly?

    222 shares
    Share 89 Tweet 56
  • EU nasty and vindictive? Nigel Farage criticizes EU vaccines strategy

    202 shares
    Share 81 Tweet 51
  • Burkini Debate: To Ban or Not to Ban the Burkini, Burka and Niqab in EUROPE?

    193 shares
    Share 77 Tweet 48

Join eudebates newsletter!

Enter your email to receive our newsletter.

Don't worry, we don't spam
eudebates_logo

Follow us on social media:

Recent News

  • Watch State of the Union live: Ursula von der Leyen gives 2022 address #SOTEU
  • EU steps up solidarity with refugees fleeing Ukraine
  • REPowerEU to get rid of the dependencies of Russian fossil fuel
  • EU sanctions against Russia following the invasion of Ukraine
  • Finland: NATO membership ‘will change’ after Russian invasion

Newsletter

Join eudebates newsletter!

Enter your email to receive our newsletter.

Don't worry, we don't spam
SOTEU 2022 - State of the Union speech

Watch State of the Union live: Ursula von der Leyen gives 2022 address #SOTEU

14/09/2022
Volunteers preparing food for Ukrainian refugees arriving at Berlin Central Station

EU steps up solidarity with refugees fleeing Ukraine

08/03/2022
pump jack oil diesel

REPowerEU to get rid of the dependencies of Russian fossil fuel

08/03/2022
  • Home
  • EU Policies
  • Special Debates
  • Events
  • Vote & Polls
  • Video

© 2022 eudebates - EU debates, dialogue, communication for a better Europe - Privacy Policy.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In

Add New Playlist

No Result
View All Result
  • EU Policies
  • World
  • Special Debates
  • Events
  • Vote & Polls

© 2022 eudebates - EU debates, dialogue, communication for a better Europe - Privacy Policy.

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. Visit our Privacy and Cookie Policy.