Editing Central bank (section)

=== Climate change ===
In the aftermath of the [[Paris Agreement|Paris agreement on climate change]], a debate is now underway on whether central banks should also pursue environmental goals as part of their activities. In 2017, eight central banks formed the [[Network for Greening the Financial System|Network for Greening the Financial System (NGFS)]]<ref>{{cite web|date=2017-12-12|title=Joint statement by the Founding Members of the Central Banks and Supervisors Network for Greening the Financial System – One Planet Summit|url=https://www.banque-france.fr/en/communique-de-presse/joint-statement-founding-members-central-banks-and-supervisors-network-greening-financial-system-one|access-date=2020-11-21|website=Banque de France|language=en-GB|archive-date=26 November 2020|archive-url=https://web.archive.org/web/20201126192807/https://www.banque-france.fr/en/communique-de-presse/joint-statement-founding-members-central-banks-and-supervisors-network-greening-financial-system-one|url-status=live}}</ref> to evaluate the way in which central banks can use their regulatory and monetary policy tools to support [[climate change mitigation]]. Today more than 70 central banks are part of the NGFS.<ref>{{cite web|url = https://www.ngfs.net/en/about-us/membership|title = Membership|date = 12 September 2019|access-date = 21 November 2020|archive-date = 19 April 2020|archive-url = https://web.archive.org/web/20200419145454/https://www.ngfs.net/en/about-us/membership |url-status= live}}</ref>

In January 2020, the [[European Central Bank]] has announced<ref>{{cite press release |publisher=European Central Bank |date=2020-01-23 |title=ECB launches review of its monetary policy strategy |url=https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr200123~3b8d9fc08d.en.html |language=en}}</ref> it will consider climate considerations when reviewing its monetary policy framework.

Proponents of "green monetary policy" are proposing that central banks include climate-related criteria in their collateral eligibility frameworks, when conducting asset purchases and also in their refinancing operations.<ref>{{Cite web|last=Lerven|first=Frank van|title=The European Central Bank and climate change|url=https://neweconomics.org/2020/04/the-ecb-and-climate-change|access-date=2020-11-21|website=New Economics Foundation|language=en|archive-date=27 November 2020|archive-url=https://web.archive.org/web/20201127085523/https://neweconomics.org/2020/04/the-ecb-and-climate-change|url-status=live}}</ref> But critics such as [[Jens Weidmann]] are arguing it is not central banks' role to conduct climate policy.<ref>{{Cite web|title=Weidmann: Central banks do not have a magic wand for saving the planet|url=https://www.bundesbank.de/en/press/contributions/central-banks-cannot-solve-climate-change-on-their-own--851320|access-date=2020-11-21|website=www.bundesbank.de|language=en|archive-date=19 November 2020|archive-url=https://web.archive.org/web/20201119094536/https://www.bundesbank.de/en/press/contributions/central-banks-cannot-solve-climate-change-on-their-own--851320|url-status=live}}</ref> China is among the most advanced central banks when it comes to green monetary policy.<ref>{{cite web |title=The Green Central Banking Scorecard |url=https://positivemoney.org/publications/green-central-banking-scorecard/ |access-date=2022-06-06 |website=Positive Money |archive-date=29 May 2022 |archive-url=https://web.archive.org/web/20220529234432/https://positivemoney.org/publications/green-central-banking-scorecard/ |url-status=live}}</ref> It has given green bonds preferential status to lower their yield<ref>{{cite journal |last1=Macaire |first1=Camille |last2=Naef |first2=Alain |date=2022-01-09 |title=Greening monetary policy: evidence from the People's Bank of China |url=https://doi.org/10.1080/14693062.2021.2013153 |journal=Climate Policy |volume=23 |pages=138–149 |doi=10.1080/14693062.2021.2013153 |s2cid=235592376 |issn=1469-3062 |access-date=6 June 2022 |archive-date=1 July 2023 |archive-url=https://web.archive.org/web/20230701075448/https://www.tandfonline.com/doi/full/10.1080/14693062.2021.2013153 |url-status=live }}</ref> and uses window policy to direct green lending.<ref>{{cite journal |last1=Dikau |first1=Simon |last2=Volz |first2=Ulrich |date=2021-12-08 |title=Out of the window? Green monetary policy in China: window guidance and the promotion of sustainable lending and investment |journal=Climate Policy |volume=23 |pages=122–137 |doi=10.1080/14693062.2021.2012122 |s2cid=245098383 |issn=1469-3062|doi-access=free}}</ref>

The implications of potential [[stranded asset]]s in the economy highlights one example of the embedded transition risk to climate change with potential [[cascade effect]]s throughout the [[financial system]].<ref>{{cite journal |last1=Campiglio |first1=Emanuele |last2=Dafermos |first2=Yannis |last3=Monnin |first3=Pierre |last4=Ryan-Collins |first4=Josh |last5=Schotten |first5=Guido |last6=Tanaka |first6=Misa |date=2018 |title=Climate change challenges for central banks and financial regulators |url=https://www.nature.com/articles/s41558-018-0175-0 |journal=Nature Climate Change |language=en |volume=8 |issue=6 |pages=462–468 |doi=10.1038/s41558-018-0175-0 |bibcode=2018NatCC...8..462C |s2cid=90694773 |issn=1758-6798 }}</ref><ref>{{Cite book |last=European Systemic Risk Board. |url=https://data.europa.eu/doi/10.2849/703620 |title=Too late, too sudden: transition to a low carbon economy and systemic risk. |date=2016 |publisher=Publications Office |location=LU |doi=10.2849/703620|isbn=978-92-95081-24-6 }}</ref><ref>{{Cite journal |date=2013-01-01 |title=Unburnable carbon 2013: wasted capital and stranded assets |url=https://doi.org/10.1108/meq.2013.08324eaa.003 |journal=Management of Environmental Quality|volume=24 |issue=5 |doi=10.1108/meq.2013.08324eaa.003 |issn=1477-7835}}</ref> In response, four broad types of interventions including methodology development, investor encouragement, [[financial regulation]] and policy toolkits have been adopted by or suggested for central banks.<ref name=":0" />

Achieving the [[2 degree climate target|2°C threshold]] revolve in part around the development of climate-aligned financial regulations. A significant challenge lies in the lack of awareness among corporations and investors, driven by poor information flow and insufficient disclosure.<ref name=":0" /> To address this issue, regulators and central banks are promoting transparency, [[integrated reporting]], and exposure specifications, with the goal of promoting long-term, low-carbon emission goals, rather than short-term financial objectives.<ref name=":0" /><ref>{{cite journal |last1=Galati |first1=Gabriele |last2=Moessner |first2=Richhild |date=2017 |title=What Do We Know About the Effects of Macroprudential Policy? |url=https://onlinelibrary.wiley.com/doi/10.1111/ecca.12229 |journal=Economica |language=en |volume=85 |issue=340 |pages=735–770 |doi=10.1111/ecca.12229 |s2cid=151251007 |issn=0013-0427 }}</ref> These regulations aim to assess risk comprehensively, identifying [[carbon-intensive]] assets and increasing their capital requirements. This should result in high-carbon assets becoming less attractive while favoring low-carbon assets, which have historically been perceived as high-risk, and low [[Volatility (finance)|volatility]] [[investment vehicles]].<ref name=":0" /><ref>{{cite journal |date=2017 |editor-last=Arestis |editor-first=Philip |editor2-last=Sawyer |editor2-first=Malcolm |title=Economic Policies since the Global Financial Crisis |url=https://doi.org/10.1007/978-3-319-60459-6 |journal=SpringerLink |language=en |doi=10.1007/978-3-319-60459-6|isbn=978-3-319-60458-9 }}</ref><ref>{{cite journal |last1=Schoenmaker |first1=Dirk |last2=Van Tilburg |first2=Rens |date=2016-09-01 |title=What Role for Financial Supervisors in Addressing Environmental Risks? |url=https://doi.org/10.1057/ces.2016.11 |journal=Comparative Economic Studies |language=en |volume=58 |issue=3 |pages=317–334 |doi=10.1057/ces.2016.11 |s2cid=256511579 |issn=1478-3320}}</ref>

[[Quantitative easing]] is a potential measure that could be applied by Central banks to achieve a low-carbon transition.<ref name=":0" /> Although there is a historical bias toward high-carbon companies, included in Central banks portfolios due to their high credit ratings, innovative approaches to quantitative easing could invert this trend to favor low-carbon assets.<ref name=":0" /><ref>{{cite journal |last=Monnin |first=Pierre |date=2018 |title=Central Banks and the Transition to a Low-Carbon Economy |url=http://dx.doi.org/10.2139/ssrn.3350913 |journal=SSRN Electronic Journal |doi=10.2139/ssrn.3350913 |s2cid=219373327 |issn=1556-5068}}</ref><ref>{{cite web |last1=Bernardo |first1=Giovanni |last2=Ryan-Collins |first2=Josh |last3=Werner |first3=Richard |last4=Greenham |first4=Tony |title=Strategic quantitative easing |url=https://neweconomics.org/2013/07/strategic-quantitative-easing |access-date=2023-11-03 |website=New Economics Foundation |language=en}}</ref>

Considering the potential impact of central banks on climate change, it is important to consider the mandates of central banks. The mandate of a central bank can be narrow, meaning only a few objectives are given, limiting the ability of a central bank to include climate change in its policies.<ref name=":0" /> However, central bank mandates may not necessarily have to be modified to accommodate climate change-related activities.<ref name=":0" /> For example, the [[European Central Bank]] has incorporated carbon-emissions into its asset purchase criteria, despite its relatively narrow mandate that focuses on price stability.<ref>{{cite journal |last=European Central Bank |title=ECB provides details on how it aims to decarbonise its corporate bond holdings |url=https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.pr220919~fae53c59bd.en.html |access-date=2023-11-03 |website=European Central Bank|date=19 September 2022 }}</ref>