Climate change poses significant risks to the environment, the economy and to financial stability. Supervisors, regulators and central bankers must account for these risks, as otherwise their expectations about the economic and financial future will be systematically biased. To provide an analytical framework for addressing these issues, the Oesterreichische Nationalbank and the Austrian Ministry of Finance offered a joint course on green finance at the JVI for the first time. The aim of the course was to (i) present scientific evidence on the macrofinancial impact of climate change, (ii) discuss a number of policy tools for supervisors and monetary authorities designed to safeguard the financial system against climate-related effects, and (iii) give an overview of the most recent European policy initiatives aimed at mitigating climate change. The course was delivered virtually from June 14 to 17, 2021, with presentations from both academics and policymakers to cover theoretical and practical insights.
The departure point for the course was the basic notion of physical and transition risks associated with climate change. It demonstrated their macroeconomic consequences and the relevance of path dependencies and introduced the concept of a carbon budget. Furthermore, it emphasized the importance of scenario techniques as the expected global temperature increases will exceed recorded levels and, therefore, historic data will be of limited use.
Representatives of the European Commission, national governments and central banks presented their policy initiatives to fight climate change and control its economic impact. They made clear that policy coordination and interinstitutional cooperation are paramount if these programs are to be successful. For EU member states, the Commission’s legislative proposals set the stage for their actions, but there are also some initiatives that can be implemented at the national level, for which private-sector involvement is often central. Financing transformative investments by so-called green bonds is a challenge for both the private and the public sector, and issuers of green bonds shared their experience with these instruments.
The course paid particular attention to the implications of climate change for central banks by addressing, in separate presentations, on the one hand the consequences of climate change for monetary policy which were also discussed in the Eurosystem’s recent strategy review, and on the other hand the potential risks for financial stability with a particular focus on climate stress tests.
Even though the course had to be held online, participants showed a keen interest in the topics addressed and engaged in lively discussions. There are plans to repeat the course in 2022, when the general situation will hopefully allow for an in-person course in Vienna.
Wolfgang Pointner, Oesterreichische Nationalbank