Let's Talk About the Weather: The Impact of Climate Change on Central Banks

Bank of England

Abstract - This paper examines the channels via which climate change and policies to mitigate it could affect a central bank’s ability to meet its monetary and financial stability objectives. We argue that two types of risks are particularly relevant for central banks. First, a weather-related natural disaster could trigger financial and macroeconomic instability if it severely damages the balance sheets of households, corporates, banks, and insurers (physical risks). Second, a sudden, unexpected tightening of carbon emission policies could lead to a disorderly re-pricing of carbon-intensive assets and a negative supply shock (transition risks). Climate-related disclosure could facilitate an orderly transition to a low-carbon economy if it helps a wide range of investors better assess their financial risk exposures.

Length of Resource
38 pages
 Sandra Batten, Rhiannon Sowerbutts and Misa Tanaka
Date Published
Publication Type
Research paper
Resource Type

ResourceID: 177835

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