Read the full speech at BIS.
Both climate change and the transition to a carbon neutral economy pose substantial challenges for the economy and the financial system, with the potential to affect growth and inflation in the short term, but also over much longer horizons.
Physical risks, stranded assets and greater firm default risk expose the financial system to losses, which may impair the transmission of monetary policy. And the Eurosystem’s balance sheet itself is exposed to climate risk from the assets we hold, notably through our asset purchase programmes.
In short, climate change has consequences for us as a central bank pursuing our primary mandate of price stability, and our other areas of competence, including financial stability and banking supervision.
It is governments, not central banks, who are primarily responsible for facilitating an orderly transition, and who control the main required tools.
Nonetheless there are several areas where central banks can and will contribute.