Climate Change Could Blow Up the Economy. Banks Aren’t Ready.

Central banks spent much of the last 10 years hauling their economies out of a deep financial crisis that began in 2008. They may well spend the next decade coping with the disruptive effects of climate change and technology, the report said.

The European Central Bank, which on Thursday concluded a two-day meeting in Frankfurt focusing on monetary policy, is beginning to grapple with those challenges. The bank did not make any changes in interest rates or its economic stimulus program on Thursday. Instead, other issues are coming to the fore.

Christine Lagarde, the central bank’s president, who took office late last year, has pledged to put climate change on the bank’s agenda, and the issue will play an important role as the E.C.B. embarks on the first comprehensive review since 2003 of how it conducts monetary policy.

“While we might not be ahead of the curve yet, we are not sitting on our bottoms doing nothing,” Ms. Lagarde said during a news conference on Thursday, noting that the bank’s employee pension fund is shifting investment to companies with lower carbon dioxide emissions. “It is going to be an important matter that will be debated during the strategy review.”

The E.C.B. formally began the review on Thursday, saying it would be done by the end of the year. The review will focus on how to steer inflation in the eurozone, the bank’s main job, while also considering “the threat to environmental sustainability, rapid digitalization, globalization and evolving financial structures.”

Article source: https://www.nytimes.com/2020/01/23/business/climate-change-central-banks.html?emc=rss&partner=rss