WOOD Flash – EME Macro/Strategy: climate transition – positioning of the European central banks

The Monetary Policy Committee members of the CNB, the MNB and the NBP spoke yesterday (15 July), in a virtual conference hosted by the MNB, on the theme of the transition towards a greener economy. The panellists’ discussion was helpful, in our view, in assessing the relative position of the respective central banks on whether they perceive climate-related risks as a policy concern and also on their assessment of the impact of climate-related risks on the financial system. In this regard, MNB appears to be a pioneer, as it launched its Green Programme in 2019 and has adopted a green mandate already, the first central bank in Europe to do so. The MNB has also extended its monetary policy toolkit to encourage more energy-efficient mortgage lending, which will become operational from August. In contrast, the representatives from the CNB and the NBP have a more conservative view on the role of central banks in climate change, and they believe it falls under the ambit of fiscal authorities. In comparison, the ECB has fully recognised that climate change affects its primary mandate in the recently-announced strategy review, which is comprehensive, but does not expect the adaption phase to take effect before 2023E, in most cases.