NGFS publishes report on adapting central bank operations to a hotter world

Paris, 11th July 2024

Today, the NGFS released the report “Adapting central bank operations to a hotter world: current progress and insights from practical examples”. 

Over recent years, NGFS member institutions have gained practical experience with integrating climate-related factors into their monetary policy operations, as highlighted in the 2023 membership survey. Actions that central banks have taken span across the high-level options set out in the report published by the NGFS in 2021: (i) credit operations, (ii) asset purchases, and (iii) collateral policies. Some actions intend to protect central banks’ balance sheets from the financial risks stemming from climate change, while others aim to contribute to an orderly transition towards a low-carbon economy.

The report published today complements the 2021 report by presenting eight case studies of measures that have been implemented by NGFS members and discussing the practical insights that can be gained from these. While the list of case studies considered is non-exhaustive, it does include a significant share of the measures that central banks around the world have taken.

Sabine Mauderer, Chair of the NGFS and Member of the Executive Board of the Deutsche Bundesbank:

“Climate change affects inflation, growth and financial stability. This puts it at the very heart of central bank mandates. Recognising this, a number of NGFS members have started incorporating climate change considerations into monetary policy implementation, for example by taking climate risks into account in their asset purchase programmes, credit operations or collateral policies. This report reviews the options they have pursued, highlighting practical implementation challenges and how they were addressed. More central banks will consider adapting their frameworks as the impacts of climate change unfold. As they set out on this journey, this report will better equip them to address the impacts of climate change by building on the achievements of their peers.”

These case studies demonstrate that while practical challenges remain for “greening” central banks’ operations, including on data availability issues, they can be overcome. This is typically illustrated by the fact that several of the central banks that have taken action initially followed a cautious and gradual approach, but have signalled that they are likely to expand their policies over time. While today’s report provides an overview of actions taken across the NGFS membership, it does not prescribe any single measure or approach as country-specific factors, including differences in mandates, remain a decisive driver in this space. In addition, many of the measures presented in the report were implemented during a period when interest rates were historically low, and may be less applicable or relevant when interest rates are above the zero lower bound. 

James Talbot, Chair of the NGFS Workstream on Monetary Policy and Director of the International Directorate at the Bank of England:

“In recent years, a number of central banks have implemented climate-related adjustments to their monetary policy operations. This report gathers a selection of those experiences, providing practical insights to inform other central banks who want to adjust their operations in line with their respective mandates. Exchanging insights and practical experience in this way is one of the key strengths of the NGFS network.”

About the NGFS

The NGFS, launched at the Paris One Planet Summit on 12^th December 2017, is a group of central banks and supervisors, which on a voluntary basis are willing to share best practices and contribute to the development of environment and climate risk management in the financial sector, and to mobilise mainstream finance to support the transition toward a sustainable economy. The NGFS brings together 141 central banks and supervisors and 21 observers. The NGFS is chaired by Ms Sabine Mauderer, Member of the Executive Board of the Deutsche Bundesbank. The Secretariat, headed by Mr Yann Marin, is provided by Banque de France.

For more details, visit the NGFS website, LinkedIn and X account or contact the NGFS Secretariat at Banque de France sec.ngfs@banque-france.fr 
Press Office at Banque de France: +33 (0) 1 42 92 39 00 / presse@banque-france.fr