Central bank mandates, sustainability objectives and the promotion of green finance

By Simon Dikau, Ulrich Volz. Ecological Economics, 2019

499 citations recorded by the source corpus.

This paper examines to what extent climate-related risks and mitigation policies fit into the current set of central bank mandates and objectives. To this end, we conduct a detailed analysis of central bank mandates and objectives, using the IMF's Central Bank Legislation Database, and compare these to current arrangements and sustainability responsibilities that central banks have adopted in practice. To scrutinise the alignment of mandates with climate-related policies, we differentiate between the impact of environmental factors on the conventional core objectives of central banking, and a potential promotional role of central banks with regard to green finance and sustainability. Of the 133 central banks in our sample, only 12% have explicit sustainability mandates while 29% are mandated to support the government's policy priorities, which in most cases includes sustainability goals. However, given that climate risks can directly impact on traditional core responsibilities of central banks, most notably monetary and financial stability, even central banks without explicit or implicit sustainability mandate ought to incorporate climate- and mitigation-risks into their core policy implementation frameworks in order to efficiently and successfully safeguard price and financial stability.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/b3d00760191abe7d43baa109ee13ae6c06f5dad5

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In Economics and Econometrics

1. Frank van Lerven
2. Josh Ryan‐Collins
3. Hugues Chenet
4. N. Yakovleva

In Finance

1. E. Tenakwah
2. Frank van Lerven
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6. Hugues Chenet
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Citations in the corpus

• A review of studies on green finance of banks, research gaps and future directions (2021, background): “Also, conventional banking paradigm is shifting towards the provision of ecofriendly products (Dikau and Volz 2020).”
• Finance, climate-change and radical uncertainty: Towards a precautionary approach to financial policy (2021, background): “Indeed, in addition to price stability, the mandates of central banks often cover general economic welfare, which would appear to be compatible with consideration of climate change (Krogstrup and Oman, 2019; Dikau and Volz, 2020).”
• Past, present, and future of sustainable finance: insights from big data analytics through machine learning of scholarly research (2022, unknown): “…and developing countries are increasingly seen to be mandating SDG attainments through sus-tainablefinancesuchascarbon,climate,andgreenfinancing(Dikau&Volz,2021;Elavarasan etal.,2021;Taghizadeh-Hesary&Yoshino,2019),whoseimportancearelikelytomagnify post the COVID-19 pandemic because of the…”
• A Review of the Recent Developments of Green Banking in Bangladesh (2021, background): “Nevertheless, central banks and supervisors across different jurisdictions operate within different mandates and legal frameworks [71] depending on the country and related institutional frameworks [72].”