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VoxTalks Economics

S7 Ep57: Can central banks green the financial system?

Dec 3, 2024
Frank Elderson, a key figure at the European Central Bank and a leader in climate-related financial risks, delves into how central banks can tackle climate change. He discusses the proactive measures required to integrate climate risks into financial systems and the limitations of monetary policy. Elderson emphasizes the urgent need for greater climate finance and the vital role of institutions like the NGFS in fostering sustainable financial practices. Insights from recent discussions at COP29 highlight massive investment needs to meet global climate goals.
29:41

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Quick takeaways

  • Central banks must integrate climate risks into their monetary policy frameworks to ensure long-term economic and price stability.
  • The Network for Greening the Financial System fosters collaboration among central banks to effectively address climate-related financial risks.

Deep dives

The Role of Central Banks in Climate Policy

Central banks are increasingly recognizing the significance of climate-related issues in maintaining price and financial stability. Although their primary objective is price stability, they understand that neglecting climate risks undermines this goal. For instance, the severe droughts in the EU led to measurable impacts on GDP and food price inflation, highlighting the interconnectedness of climate and economic stability. Therefore, central banks must consider these factors when implementing their policies, reinforcing the idea that they have a role to play in addressing climate challenges through their financial mechanisms.

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