The Macroprudential Response to Climate Systemic Risk: Four Essential Pillars

, , and | 26 February 2026
Monetary, Policy Briefs | Tags: Climate Risks, Financial Stability, Macroprudential Policy, Portugal, Systemic Risks

 

Climate risks pose systemic risk, potentially undermining financial stability. Any systemic risk calls for an adequate macroprudential policy response, and climate systemic risk is no exception. Against this background, financial supervisors are assessing how to design effective macroprudential tools to address it.

While existing macroprudential policy toolkits can already be deployed to address climate-related systemic risk, their implementation shall account for the data available to assess climate-related risks, the state of knowledge about them, and the institutional frameworks in which macroprudential instruments operate. To be efficient, these measures must ensure that the financial system maintains its shock-absorbing capacity and that the buildup of financial vulnerabilities is contained.

This policy brief proposes four pillars to ground effective macroprudential instruments for addressing climate systemic risk. It highlights that such instruments should be grounded in forward-looking, dynamic approaches, entail incentives to mitigate the build-up of climate systemic risk, be integrated into comprehensive policy packages, and involve some degree of international coordination.

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