France’s central bank governor François Villeroy de Galhau has said the fight against climate change is a “must have” focus as he pushed back against criticism of central banks’ increasing involvement in the issue.
“Climate-related risks are clearly among the long-term risks to which financial institutions are exposed: monitoring these risks is not a ‘nice to have’, or part of a CSR (corporate social responsibility) policy, but a ‘must have’,” Villeroy, who also sits on the European Central Bank’s Governing Council, was quoted as saying when he appeared at the City Week conference in London.
He added that central bankers shouldn’t waste too much time on the legal and political debate about central bank mandates in reaction to some of the recent concerns voiced by a number of top central bankers.
“Central banks’ core mandate worldwide is price stability, and climate change already affects the level of prices and activity,” Villeroy stressed.
“It’s not mission creep, it’s not a politicisation of our mandate – it is our core business and core duty.”
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The debate about how much influence central banks can have in tackling climate issues has become increasingly divisive this year and Villeroy who has long been a firm advocate of doing more, urged central banks and others to come up with better models of how climate change is likely to alter economies.
Recent “pilot stress tests” had been carried out and pointed to a need for shorter-term scenarios with a five-year time horizon because climate change was accelerating, he said.
Most of the world’s central banks and multilateral lenders such as the International Monetary Fund under the aegis of the Network for Greening the Financial System would therefore publish a “conceptual framework” at end of this year while it is also aiming to release short-term climate change scenarios by the end of 2024, which should show more adverse developments, incorporate tougher “shocks” and directly explore the potential impacts of climate change on inflation, he added.
Story was adapted from Reuters.
