Perspective | Published:

Climate change challenges for central banks and financial regulators

Nature Climate Changevolume 8pages462468 (2018) | Download Citation

The academic and policy debate regarding the role of central banks and financial regulators in addressing climate-related financial risks has rapidly expanded in recent years. This Perspective presents the key controversies and discusses potential research and policy avenues for the future. Developing a comprehensive analytical framework to assess the potential impact of climate change and the low-carbon transition on financial stability seems to be the first crucial challenge. These enhanced risk measures could then be incorporated in setting financial regulations and implementing the policies of central banks.

  • Subscribe to Nature Climate Change for full access:



Additional access options:

Already a subscriber?  Log in  now or  Register  for online access.

Additional information

Publisher's note: Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.


  1. 1.

    Perez, C. Structural change and assimilation of new technologies in the economic and social systems. Futures 15, 357–375 (1983).

  2. 2.

    Schumpeter, J. A. The Theory of Economic Development (Harvard Univ. Press, Cambridge, MA, 1934).

  3. 3.

    Geels, F. W., Sovacool, B. K., Schwanen, T. & Sorrell, S. Sociotechnical transitions for deep decarbonization. Science 357, 1242–1244 (2017).

  4. 4.

    Battiston, S., Mandel, A., Monasterolo, I., Schütze, F. & Visentin, G. A climate stress-test of the financial system. Nat. Clim. Change 7, 283–288 (2017).

  5. 5.

    Carney, M. Breaking the Tragedy of the Horizon—Climate Change and Financial Stability (Bank of England, 2015).

  6. 6.

    Villeroy de Galhau, F. Climate Change: The Financial Sector and Pathways to 2°C (Banque de France, 2015).

  7. 7.

    Signorini, L. F. The Financial System, Environment and Climate: A Regulator’s Perspective (Bank of Italy, 2017).

  8. 8.

    Lane, T. Thermometer Rising—Climate Change and Canada’s Economic Future (Bank of Canada, 2017).

  9. 9.

    Weidmann, J. Welcome and Opening Speech (Deutsche Bundesbank, 2017).

  10. 10.

    Villeroy de Galhau, F. Green Finance—A New Frontier for the 21st Century (Banque de France, 2018).

  11. 11.

    Knot, K. From Mission to Supervision (De Nederlandsche Bank, 2018).

  12. 12.

    Dombret, A. Greener Finance—Better Finance? How Green Should the Financial World Be? (Deutsche Bundesbank, 2018).

  13. 13.

    Central Bank and Supervisors Network for Greening the Financial System Joint Statement by the Founding Members of the Central Banks and Supervisors Network for Greening the Financial System (Banco de México, Bank of England, Banque de France, De Nederlandsche Bank, Deutsche Bundesbank, Finansinspektionen, Monetary Authority of Singapore, The People´s Bank of China, 2017).

  14. 14.

    Campiglio, E. Beyond carbon pricing: The role of banking and monetary policy in financing the transition to a low-carbon economy. Ecol. Econ. 121, 220–230 (2016).

  15. 15.

    Volz, U. On the Role of Central Banks in Enhancing Green Finance (UNEP Inquiry into the Design of a Sustainable Financial System, 2017).

  16. 16.

    van Lerven, F. & Ryan-Collins, J. Central Banks, Climate Change and the Transition to a Low Carbon Economy: A Policy Briefing (New Economics Foundation, 2017).

  17. 17.

    Dafermos, Y., Nikolaidi, M. & Galanis, G. Climate Change, Financial Stability and Monetary Policy Working Paper 1712 (Post-Keynesian Economics Study Group, 2017).

  18. 18.

    Barkawi, A. & Monnin, P. in Greening China’s Financial System Ch. 7 (International Institute for Sustainable Development, Winnipeg, 2015).

  19. 19.

    Sheng, A. Central Banks Can and Should do Their Part in Funding Sustainability (Centre for International Governance Innovation, 2015).

  20. 20.

    Monnin, P. Central Banks and the Transition to a Low-Carbon Economy (Council on Economic Policies, 2018).

  21. 21.

    Rozenberg, J., Hallegatte, S., Perrissin-Fabert, B. & Hourcade, J.-C. Funding low-carbon investments in the absence of a carbon tax. Clim. Policy 13, 134–141 (2013).

  22. 22.

    The Impact of Climate Change on the UK Insurance Sector (Prudential Regulation Authority, 2015).

  23. 23.

    Batten, S., Sowerbutts, R. & Tanaka, M. Let’s Talk About the Weather: The Impact of Climate Change on Central Banks (Bank of England, 2016).

  24. 24.

    Dietz, S., Bowen, A., Dixon, C. & Gradwell, P. ‘Climate value at risk’ of global financial assets. Nat. Clim. Change 6, 676–679 (2016).

  25. 25.

    Meinshausen, M. et al. Greenhouse-gas emission targets for limiting global warming to 2 °C. Nature 458, 1158–1162 (2009).

  26. 26.

    McGlade, C. & Ekins, P. The geographical distribution of fossil fuels unused when limiting global warming to 2 °C. Nature 517, 187–190 (2015).

  27. 27.

    Regelink, M., van Reinders, H., van der Viel, I. & Vleeschhouwer, M. Waterproof: An Exploration of Climate Related Financial Risks (De Nederlandsche Bank, 2017).

  28. 28.

    Pfeiffer, A., Millar, R., Hepburn, C. & Beinhocker, E. The ‘2 C capital stock’ for electricity generation: committed cumulative carbon emissions from the electricity generation sector and the transition to a green economy. Appl. Energy 179, 1395–1408 (2016).

  29. 29.

    Campiglio, E., Godin, A. & Kemp-Benedict, E. Networks of Stranded Assets: A Case for a Balance Sheet Approach (Agence Française de Développement, 2017).

  30. 30.

    Too Late, Too Sudden—Transition to a Low-Carbon Economy and Systemic Risk (European Systemic Risk Board, 2016).

  31. 31.

    Unburnable Carbon 2013: Wasted Capital and Stranded Assets (Carbon Tracker and Grantham Research Institute, 2013).

  32. 32.

    Better Growth, Better Climate: the New Climate Economy Report (New Climate Economy, 2014).

  33. 33.

    Investing in Climate, Investing in Growth (Organisation for Economic Co-operation and Development, 2017).

  34. 34.

    State and Trends of Carbon Pricing 2016 (World Bank, 2016).

  35. 35.

    Edenhofer, O., Knopf, B., Bak, C. & Bhattacharya, A. Aligning climate policy with finance ministers’ G20 agenda. Nat. Clim. Change 7, 463–465 (2017).

  36. 36.

    Schotten, G., van Ewijk, S., Regelink, M., Dicou, D. & Kakes, J. Time for Transition—An Exploratory Study of the Transition to a Carbon-Neutral Economy (Netherlands Central Bank, 2016).

  37. 37.

    Scott, M., Van Hulzen, J. & Jung, C. The Bank of England’s Response to Climate Change 98–109 (Bank of England, 2017).

  38. 38.

    Climate Change and Financial Stability (Finansinspektionen, 2016).

  39. 39.

    Assessing Climate Change-Related Risks in the Banking Sector (Direction Générale du Trésor, Banque de France and ACPR, 2017).

  40. 40.

    Thomä, J. et al. Transition Risk Toolbox: Scenarios, Data and Models (2° Investing Initiative, 2016).

  41. 41.

    Annicchiarico, B. & Di Dio, F. GHG emissions control and monetary policy. Environ. Resour. Econ. 67, 823–851 (2016).

  42. 42.

    Dafermos, Y., Nikolaidi, M. & Galanis, G. A stock-flow-fund ecological macroeconomic model. Ecol. Econ. 131, 191–207 (2017).

  43. 43.

    Monasterolo, I. & Raberto, M. The EIRIN flow-of-funds behavioural model of green fiscal policies and green sovereign bonds. Ecol. Econ. 144, 228–243 (2018).

  44. 44.

    Lamperti, F., Dosi, G., Napoletano, M., Roventini, A. & Sapio, A. Faraway, So Close: Coupled Climate and Economic Dynamics in an Agent-Based Integrated Assessment Model (Sciences Po, 2017).

  45. 45.

    Safarzyńska, K. & van den Bergh, J. C. Integrated crisis-energy policy: Macro-evolutionary modelling of technology, finance and energy interactions. Technol. Forecast. Soc. Change 114, 119–137 (2017).

  46. 46.

    McLeay, M., Radia, A. & Thomas, R. Money Creation in the Modern Economy 14–27 (Bank of England, 2014).

  47. 47.

    Burgess, S., Burrows, O., Godin, A., Kinsella, S. & Millard, S. A Dynamic Model of Financial Balances for the United Kingdom (Bank of England, 2016).

  48. 48.

    Turrell, A. Agent-Based Models: Understanding the Economy from the Bottom Up (Bank of England, 2016).

  49. 49.

    Recommendations of the Task Force on Climate-Related Financial Disclosures (Task Force on Climate-related Financial Disclosures, 2017).

  50. 50.

    Mason, A., Martindale, W., Heath, A. & Chatterjee, S. French Energy Transition Law: Global Investor Briefing (Principles for Responsible Investments, 2016).

  51. 51.

    Dietz, S. et al. Management Quality and Carbon Performance of Cement Producers: A Commentary (Transition Pathway Initiative, 2017).

  52. 52.

    Aspin, C. The Missing 55%. Voting Records for the 10 Largest Utility Investors Show Divergence on Climate Risk (Preventable Solutions, 2017).

  53. 53.

    Ehlers, T. & Packer, F. Green Bond Finance and Certification 89–104 (Bank for International Settlements, 2017).

  54. 54.

    Caldecott, B. et al. Asset-Level Data and the Energy Transition: Findings from ET Risk Work Package 2 (Oxford Sustainable Finance Programme, 2018).

  55. 55.

    Weber, E. U. Breaking cognitive barriers to a sustainable future. Nat. Hum. Behav. 1, 0013 (2017).

  56. 56.

    Silver, N. Blindness to risk: why institutional investors ignore the risk of stranded assets. J. Sustain. Finance Invest. 7, 99–113 (2017).

  57. 57.

    Haldane, A. G. Patience and Finance (Bank of England, 2010).

  58. 58.

    EU High-Level Expert Group on Sustainable Finance Financing a Sustainable European Economy (European Commission, 2018).

  59. 59.

    Galati, G. & Moessner, R. What do we know about the effects of macroprudential policy? Economica (2017).

  60. 60.

    Cerutti, E., Claessens, S. & Laeven, L. The use and effectiveness of macroprudential policies: New evidence. J. Financ. Stab. 28, 203–224 (2017).

  61. 61.

    Campiglio, E., Godin, A., Kemp-Benedict, E. & Matikainen, S. in Economic Policies Since the Global Financial Crisis (eds Arestis, P. & Sawyer, M.) 313–356 (Palgrave Macmillan, London, 2017).

  62. 62.

    Schoenmaker, D. & Tilburg, R. V. What role for financial supervisors in addressing environmental risks? Comp. Econ. Stud. 58, 317–334 (2016).

  63. 63.

    Dikau, S. & Ryan-Collins, J. Green Central Banking in Emerging Market and Developing Countries (New Economics Foundation, 2017).

  64. 64.

    Intermediate Circular 236 (Banque du Liban, 2010).

  65. 65.

    Circular 3, 547 of July 7, 2011: Establishes Procedures and Parameters Related to the Internal Capital Adequacy Assessment Process (ICAAP) (Banco Central do Brasil, 2011);

  66. 66.

    China Monetary Policy Report—Quarter Four 2017 (People’s Bank of China, 2018).

  67. 67.

    Thomä, J. & Hilke, A. The Green Supporting Factor: Quantifying the Impact on European Banks and Green Finance (2 Degrees Investing Initiative, 2018).

  68. 68.

    Reinforcing Integrated Supervision to Strengthen Capital Markets Union and Financial Integration in a Changing Environment (European Commission, 2017).

  69. 69.

    Call for a European Finance–Climate Pact (Collectif Climat 2020, 2017).

  70. 70.

    Public Sector Purchase Programme (PSPP): Questions & Answers (European Central Bank, 2017);

  71. 71.

    Corporate Sector Purchase Programme (CSPP): Questions & Answers (European Central Bank, 2017);

  72. 72.

    Matikainen, S., Campiglio, E. & Zenghelis, D. The Climate Impact of Quantitative Easing (Grantham Research Institute on Climate Change and the Environment, 2017).

  73. 73.

    Anderson, V. Green Money: Reclaiming Quantitative Easing Money Creation for the Common Good (Green/EFA Group in the European Parliament, 2015).

  74. 74.

    Ryan-Collins, J., Werner, R., Greenham, T. & Bernardo, G. Strategic Quantitative Easing: Stimulating Investment to Rebalance the Economy (New Economics Foundation, 2013).

  75. 75.

    Asset Purchase Programmes (European Central Bank, 2018);

  76. 76.

    Bonds and Climate Change: The State of the Market in 2017 (Climate Bonds Initiative, 2017).

  77. 77.

    Global Landscape of Climate Finance 2017 (Climate Policy Initiative, 2017).

  78. 78.

    Mazzucato, M. & Semieniuk, G. Financing renewable energy: Who is financing what and why it matters. Technol. Forecast. Soc. Change 127, 8–22 (2018).

  79. 79.

    EIB Climate Strategy (European Investment Bank, 2016).

  80. 80.

    G20 Green Finance Synthesis Report 2017 (Green Finance Study Group, 2016).

  81. 81.

    McDaniels, J., Robins, N. & Bacani, B. Sustainable Insurance: The Emerging Agenda for Supervisors and Regulators (UN Environment Inquiry, 2017).

  82. 82.

    Priority Sector Lending—Targets and Classification (Reserve Bank of India, 2015).

  83. 83.

    Barkawi, A. & Monnin, P. Monetary Policy and Sustainability—The Case of Bangladesh (UNEP Inquiry into the Design of a Sustainable Financial System, 2015).

  84. 84.

    Principal Terms and Conditions for the Fund-Provisioning Measure to Support Strengthening the Foundations for Economic Growth Conducted Through the Loan Support Program (Bank of Japan, 2010).

  85. 85.

    Goodhart, C. A. E. The changing role of central banks. Financ. Hist. Rev. 18, 135–154 (2011).

  86. 86.

    Ryan-Collins, J. Breaking the taboo: a history of monetary financing in Canada, 1930–1975. Br. J. Sociol. 68, 643–669 (2017).

  87. 87.

    Elliott, D. J., Feldberg, G. & Lehnert, A. The History of Cyclical Macroprudential Policy in the United States (Board of Governors of the Federal Reserve System, 2013).

  88. 88.

    2016 Annual Report (De Nederlandsche Bank, 2017).

  89. 89.

    Maechler, A. M. Investment Policy in Times of High Foreign Exchange Reserves (Swiss National Bank, 2016).

  90. 90.

    Observation and Exclusion of Companies (Norges Bank, 2017);

  91. 91.

    Mesonnier, J.-S., O’Donnell, C. & Toutain, O. The Interest of Being Eligible (Banque de France, 2017).

  92. 92.

    Nyborg, K. G. Collateral Frameworks: the Open Secret of Central Banks (Cambridge Univ. Press, Cambridge, 2017).

  93. 93.

    Van Bekkum, S., Gabarro, M. & Irani, R. M. Does a larger menu increase appetite? Collateral eligibility and bank risk-taking. Rev. Financ. Stud. 3, 943–979 (2018).

  94. 94.

    Stern, N. The Economics of Climate Change: The Stern Review (Cambridge Univ. Press, 2007).

  95. 95.

    Moody’s to Analyse Carbon Transition Risk Based on Emissions Reduction Scenario Consistent with Paris Agreement (Moody's Investors Service, 2016).

  96. 96.

    IPCC Climate Change 2014: Synthesis Report (eds Core Writing Team, Pachauri, R. K. & Meyer L. A.) (IPCC, 2015).

Download references


The authors would like to thank S. Breeden, G. Galati, M. Scott and E. Denbee for useful comments on earlier drafts of the paper. E.C. would like to acknowledge the support of the Swedish Foundation for Strategic Environmental Research (Mistra). J.R.C. and P.M. would like to acknowledge the support of Partners for a New Economy. Any views expressed are solely those of the author(s) and so cannot be taken to represent those of the Bank of England or DNB, or to state their policies.

Author information


  1. Institute for Ecological Economics, Vienna University of Economics and Business, Vienna, Austria

    • Emanuele Campiglio
  2. Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science, London, UK

    • Emanuele Campiglio
  3. Department of Accounting, Economics and Finance, University of the West of England, Bristol, UK

    • Yannis Dafermos
  4. Council on Economic Policies, Zurich, Switzerland

    • Pierre Monnin
  5. Institute for Innovation and Public Purpose, University College London, London, UK

    • Josh Ryan-Collins
  6. De Nederlandsche Bank, Amsterdam, The Netherlands

    • Guido Schotten
  7. Bank of England, London, UK

    • Misa Tanaka


  1. Search for Emanuele Campiglio in:

  2. Search for Yannis Dafermos in:

  3. Search for Pierre Monnin in:

  4. Search for Josh Ryan-Collins in:

  5. Search for Guido Schotten in:

  6. Search for Misa Tanaka in:


All authors contributed to the writing of the manuscript, under the coordination of E.C.

Corresponding author

Correspondence to Emanuele Campiglio.

About this article

Publication history





Rights and permissions

To obtain permission to re-use content from this article visit RightsLink.