New German central bank head says addressing climate change a core task for monetary stability
Clean Energy Wire
The new head of the German central bank (Bundesbank), Joachim Nagel, has said combating climate change is a key task for the bank. “Climate change requires a restructuring of our economy,” Nagel said at his inauguration speech, adding that “the Bundesbank must and will address this”. The central bank’s core mandate would be to guarantee price stability, he said, arguing that “greater emphasis on climate aspects is part of a monetary policy focused on stability”. This task would “certainly gain importance in our supervisory work”. Nagel takes over at a time when inflation levels in Europe and elsewhere are at the highest level in decades, partly fuelled by the ongoing energy price crisis. “Climate change and climate policy do have an effect of inflation and growth,” Nagel said. Risks stemming from global warming and the effects of emissions reduction measures, therefore, would have to be closely monitored by central banks to gauge the value of assets banks hold as securities. “In order to do this, we need better information – and we should make sure that we get it,” Nagel said. A more transparent financial system overall would also lead to a “greener” system, he argued. While governments and parliaments had to set the course on climate policy, the central banks’ task would be to ensure that enough funds for the measures are made available.
Addressing climate change has also been highlighted as a challenge in monetary policy by the head of the European Central Bank (ECB), Christine Lagarde. The French politician’s views in the past often clashed with those of Nagel’s predecessor Jens Weidmann, who advocated a narrower understanding of the central bank’s mandate and spoke out against intervening in climate policy. Already in 2020, the ECB in its financial stability review urged banks and "the rest of the financial system" to step up efforts "to manage the financial stability risks posed by climate change and support the transition to a greener economy”.