Overview

Climate change effects pose risks to the financial systems as we know it, including the banking sector. Central bank mandates stipulate that they are responsible for price and monetary stability, which means that major upheavals in financial markets will be problematic for the banks. Such upheavals are likely to be caused by changes in policy, as well as in consumer and investor behaviour as a reaction to worsening climate change effects. The UN PRI’ Inevitable Policy Response work estimates that a forceful policy response will happen in this decade, and that the longer governments and regulators delay action, the more disorderly and disruptive the policy and its effects will be. 

Since the launch of the Network for Greening the Financial System (NGFS), the understanding of environmental and climate risks to central banks and the financial sector is growing. Some central banks in the Central European region have joined the NGFS, while others have not. The ISFC will be working on examining the particular issues faced by the central banks in the region, and for the best options available to them for helping to position their countries and their financial sectors well for future decades. The Centre will also help build expertise on climate stress tests for banks and other relevant topics.