Climate Change and Finance: What Role for Central Banks and Financial Regulators?

This blog was published by the Bank of England on its Bank Underground blog here

Climate change poses risks to the financial system. Yet our understanding of these risks is still limited. As we explain in a recent paper published in Nature Climate Change, central banks and financial regulators could contribute to the development of methodologies and modelling tools for assessing climate-related financial risks. If it becomes clear that these risks are substantial, central banks should consider taking them into account in their operations. Both central banks and financial regulators might also consider supporting a low-carbon transition in a more active way so as to contribute to the reduction of these risks.