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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