Central Banks’ Support for Climate Action: A Literature Review and Key Issues

This comprehensive literature review examines the role of central banks in supporting climate actions. It explores the reasons why central banks should be concerned about climate change, the policy instruments available to them, the challenges they face in integrating climate considerations into their mandates and operations, and the differences in approaches between advanced and emerging economies. While national governments bear primary responsibility for climate policies—due to their political mandate, financial resources, and available instruments—central banks play a crucial role in recognizing and addressing the threats that climate change poses to price stability, as well as overall economic and financial stability. Central banks in advanced nations carefully consider their potential involvement in climate policy before implementing actions, while those in emerging markets actively utilize a broader range of tools. These differences reflect varying mandates, which closely align with the development goals of governments in emerging economies. Given the heterogeneous impacts of unabated climate change across regions, policy recommendations must be tailored to the specific circumstances of each central bank.