On 28 November 2018, the European Central Bank (ECB) published a speech by Yves Mersch, Member of the Executive Board of the ECB, on climate change and central banking. Mr Mersch notes that climate change poses the risk of considerable social costs and economic disruption. The challenges of climate change are social issues. Mr Mersch suggests for banks to take steps, including actively reducing carbon emissions and investing in infrastructure that can limit the impact of climate change, to minimise the risk of future disruption.

Mr Mersch concludes by noting that the analysis and choice of possible solutions, including suitable instruments and their financing, to address climate change require political debate. However, whilst not engaged with in political debates, monitoring and analysing the extent to which climate change or other shocks may affect the transmission of monetary policy, the economic cycle, the soundness of individual banks and financial stability as a whole, and how they interact, is part of central banks’ forward-looking approach to mitigate future environmental risks.