Climate Risk Management Governance Disclosure in Euro Area Central Banks Managing Foreign Reserves: Valuation the Role of the Board

Climate risk management in central banks has gained increasing relevance due to the financial implications of climate change on asset prices and economic stability. This study examines the governance structures of climate-related financial disclosures within Euro Area central banks that manage foreign reserves, focusing on the role of board oversight in integrating sustainability considerations into investment strategies. The literature review highlights the evolving nature of central banks’ mandates, which are moving beyond traditional financial stability objectives to incorporate climate risks into their decision-making processes. Prior research highlights the impact of board members’ values on the adoption of climate policy and the varying degrees of governance structures that support sustainability goals. However, gaps remain in understanding how governance frameworks impact the effectiveness of climate risk management and financial disclosures. This study employs a Multi-Criteria Decision Analysis (MCDA) methodology to evaluate the effectiveness of governance in managing climate-related financial risks among 18 European central banks. The research evaluates board-level oversight mechanisms, disclosure transparency, and the integration of climate considerations into foreign reserves management. A governance index is developed based on structured scoring criteria, normalizing central banks’ performance in climate-related risk oversight. The findings reveal significant heterogeneity in governance practices. Leading institutions, such as Banca d’Italia, Banque de France, and De Nederlandsche Bank, demonstrate structured governance frameworks with explicit climate oversight, dedicated committees, and regular board-level reporting. In contrast, some central banks exhibit weaker governance structures, with limited engagement in climate risk assessment and the integration of sustainability. The results highlight the need for standardized governance frameworks and enhanced regulatory alignment to ensure effective climate risk management. This paper contributes to the field of similar scientific literature by providing a comparative governance assessment of climate-related financial disclosures in central banking. It offers insights into best practices and policy recommendations to strengthen board oversight and enhance climate risk resilience in financial institutions.