Sustainability Objectives and Central Banks

Abstract

This article examines how addressing climate-related risks and supporting mitigation and adaptation policies fit into central bank mandates. According to this goal, the research conducts an empirical examination of current central bank mandates to investigate the extent to which central banks are equipped with objectives that task them to enhance sustainability and mainstream green finance. The analysis of mandates and objectives using the IMF’s Central Bank Legislation Database. Out of 159 IMF member countries and monetary unions, only 12 % have explicit sustainability mandates, while 33 % are mandated to support the government’s policy priorities, which mostly include sustainability goals. The research concludes that it should be clear that climate change and mitigation policies will have very profound impacts on economies, with potentially significant implications for price, macroeconomic, and financial stability. These need to be tackled by central banks as part of their core responsibilities. A central bank that does not address climate risks is failing to do its job.