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ECB chief addresses climate challenge

EP, Strasbourg. Photo by Frederic Köberl on Unsplash

The head of the European Central Bank (ECB) told parliamentarians in Strasbourg this week the institution is working hard to respond to climate change.

Addressing plenary for the first time at the European Parliament, Christine Lagarde, ECB President, said Tuesday the bank has to ‘gear up on climate change’ – and take it ‘into account in central banks’ policies and operations’. Her words would have been welcomed by policymakers advancing the historic EU Green Deal underpinning Europe’s mission to become the first climate-neutral continent; a goal Ursula von der Leyen, the first female President of the European Commission, declared when she took up her post last summer.

Like digitalisation, climate change affects the context in which central banks operate.

On taking effective action in the face of climate change, Christine Lagarde said: “The ECB has already moved in this direction. First, we are working to extend our knowledge about the economic impact of climate change and ensure that its effects are better reflected in our economic analyses, models and forecasting methods. Second, through its financial stability tasks, the ECB is monitoring systemic risks stemming from climate change and the transition to a carbon-neutral economy.”

She added: “This work will ultimately enable us to test how well the euro area banking sector is able to withstand climate-related risks. Finally, the ECB has taken steps to align its own investment decisions with the objectives of the Paris Agreement. In our staff pension fund, for instance, we decided to switch to a low-carbon index, and we are investigating what else we can do in our market operations.”

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Iain Robertson
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