The fight against climate change is an essential duty of central banks and they cannot ignore its effects as transient volatility. This was the message conveyed by François Villeroy de Galhau, president of the Central Bank of France and part of the Board of Directors of the European Central Bank, in a speech made on Monday (24) during the City Week conference in London, England.

"Climate-related risks are clearly among the long-term risks to which financial institutions are exposed: monitoring these risks is not optional or part of a CSR (corporate social responsibility) policy, but is something mandatory," the executive said.

The questions raised by the head of France's central bank come at a time of heightened debate about how much influence central banks can have on resolutions of climate-related issues, Reuters reports.

For Pierre Wunsch, a Belgian ECB policymaker, and Mervyn King, the former head of the Bank of England, this is primarily the task of governments. In January of this year, Jerome Powell, chair of the U.S. Federal Reserve (Fed), pointed out that the bank must "remain in its role" because "it is not a climate policymaker and never will be."

On this, Villeroy commented that central bankers should not waste too much time on the legal and political debate over their mandates. "The main mandate of central banks around the world is price stability, and climate change already affects the level of prices and activity," he stressed. "It's not a deviation from mission, it's not a politicization of our mandate — it's our main business and primary duty."

He, who is a staunch advocate of a broader range of action by monetary authorities, called on central banks and others to create better models of how climate change is likely to alter economies.

"Stress pilot tests" have been conducted recently, he noted, but as climate change is accelerating, he stressed the need for short-term scenarios with a five-year time horizon.

Source: Um só Planeta