Never waste a crisis: COVID-19, climate change and monetary policy

The role for central banks in fighting climate change considered in the context of price stability in the medium and long-term. Ignoring the risk of global warming could lead to persistent shocks to output and inflation. Heretofore central banks could afford to look through climate-related shocks, mainly because their most visible effects were largely local and temporary. Three major areas where the ECB and central banks can contribute, include:

• Involvement in defining rules and standards, and in promoting research for a for the implications of climate change for financial markets and monetary policy. The ECB is instrumental in promoting capital markets union as a member of the Network for Greening the Financial Systems and contributing to the development of EU Taxonomy for Sustainable Activities.
• The ECB is an environmentally mindful and responsible investor through it’ own pension fund investments and exploring options for other non-monetary policy portfolios.
• Climate considerations are taken into account when designing and implementing ECB monetary policy operations.