It is now increasingly accepted that central banks and financial supervisors
can no longer ignore climate change. However, there is no consensus on how
they should address climate issues. On the one hand, there is a view that
central banks and financial supervisors should mainly contribute to the
assessment of the exposure of the financial system to climate-related
financial risks, considering at the same time the possibility of
incorporating climate risks into monetary policy and financial supervision
and regulation. On the other hand, it is argued that central banks and
financial supervisors need to take action such that they contribute directly
to the decarbonisation of our economies and the prevention of climate
systemic risks. In this chapter, I analyse the main premises and
implications of these two approaches and I explain why a systemic risk
approach is necessary in the age of climate emergency. I also discuss the
challenges involved in a policy agenda aiming at the reduction of climate
systemic risks and I outline how these challenges can be tackled.
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