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Central Bank Mandates, Sustainability Objectives and the Promotion of Green Finance

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  • Simon Dikau

    ()

  • Ulrich Volz

    () (Department of Economics, SOAS University of London, UK)

Abstract

This paper examines to what extent climate-related risks and mitigation policies fit into the current set of central bank mandates and objectives. To this end, we conduct a detailed analysis of central bank mandates and objectives, using the IMF's Central Bank Legislation Database, and compare these to current arrangements and sustainability responsibilities that central banks have adopted in practice. To scrutinise the alignment of mandates with climate-related policies, we differentiate between the impact of environmental factors on the conventional core objectives of central banking, and a potential promotional role of central banks with regard to green finance and sustainability. Of the 133 central banks in our sample, only 12% have explicit sustainability mandates while 29% are mandated to support the government's policy priorities, which in most cases includes sustainability goals. However, given that climate risks can directly impact on traditional core responsibilities of central banks, most notably monetary and financial stability, even central banks without explicit or implicit sustainability mandate ought to incorporate climate- and mitigation-risks into their core policy implementation frameworks in order to efficiently and successfully safeguard price and financial stability.

Suggested Citation

  • Simon Dikau & Ulrich Volz, 2019. "Central Bank Mandates, Sustainability Objectives and the Promotion of Green Finance," Working Papers 222, Department of Economics, SOAS, University of London, UK.
  • Handle: RePEc:soa:wpaper:222
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    References listed on IDEAS

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    1. Enrique G. Mendoza, 2018. "Macroprudential Policy: Promise and Challenges," Central Banking, Analysis, and Economic Policies Book Series, in: Enrique G. Mendoza & Ernesto Pastén & Diego Saravia (ed.),Monetary Policy and Global Spillovers: Mechanisms, Effects and Policy Measures, edition 1, volume 25, chapter 7, pages 225-277, Central Bank of Chile.
    2. Warwick McKibbin & Adele Morris & Augustus J. Panton & Peter J. Wilcoxen, 2017. "Climate change and monetary policy: Dealing with disruption," CAMA Working Papers 2017-77, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
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    5. Campiglio, Emanuele & Dafermos, Yannis & Monnin, Pierre & Ryan-Collins, Josh & Schotten, Guido & Tanaka, Misa, 2018. "Climate change challenges for central banks and financial regulators," LSE Research Online Documents on Economics 88364, London School of Economics and Political Science, LSE Library.
    6. Coibion, Olivier & Gorodnichenko, Yuriy & Kueng, Lorenz & Silvia, John, 2017. "Innocent Bystanders? Monetary policy and inequality," Journal of Monetary Economics, Elsevier, vol. 88(C), pages 70-89.
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    Cited by:

    1. Channing Arndt & Chris Loewald & Konstantin Makrelov, 2020. "Wp 2004," Working Papers 10001, South African Reserve Bank.
    2. Joaquín Bernal-Ramírez & José Antonio Ocampo, 2020. "Climate change: policies to manage its macroeconomic and financial effects," Borradores de Economia 1127, Banco de la Republica de Colombia.
    3. Ingo Fender & Mike McMorrow & Vahe Sahakyan & Omar Zulaica, 2019. "Green bonds: the reserve management perspective," BIS Quarterly Review, Bank for International Settlements, September.
    4. Francesca Diluiso & Barbara Annicchiarico & Matthias Kalkuhl & Jan C. Minx, 2020. "Climate Actions and Stranded Assets: The Role of Financial Regulation and Monetary Policy," CESifo Working Paper Series 8486, CESifo.
    5. Ingo Fender & Mike McMorrow & Vahe Sahakyan & Omar Zulaica, 2020. "Reserve management and sustainability: the case for green bonds?," BIS Working Papers 849, Bank for International Settlements.
    6. Clara I. González & Soledad Núñez, 2019. "Mercados, entidades financieras y bancos centrales ante el cambio climático: retos y oportunidades," Working Papers 2019-06, FEDEA.
    7. Hyoungkun Park & Jong Dae Kim, 2020. "Transition towards green banking: role of financial regulators and financial institutions," Asian Journal of Sustainability and Social Responsibility, Springer, vol. 5(1), pages 1-25, December.

    More about this item

    Keywords

    Central banks; central bank mandates; green finance;

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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