• DOI:10.2139/ssrn.2783753
• Corpus ID: 13822583

Let's Talk About the Weather: The Impact of Climate Change on Central Banks

@article{Batten2016LetsTA,
  title={Let's Talk About the Weather: The Impact of Climate Change on Central Banks},
  author={Sandra Batten and Rhiannon Sowerbutts and Misa Tanaka},
  journal={SRPN: Carbon Reduction (Topic)},
  year={2016}
}

• S. Batten, R. Sowerbutts, Misa Tanaka
• Published 20 May 2016
• Economics
• SRPN: Carbon Reduction (Topic)

This paper examines the channels via which climate change and policies to mitigate it could affect a central bank’s ability to meet its monetary and financial stability objectives. We argue that two types of risks are particularly relevant for central banks. First, a weather-related natural disaster could trigger financial and macroeconomic instability if it severely damages the balance sheets of households, corporates, banks, and insurers (physical risks). Second, a sudden, unexpected tightening of carbon emission policies could lead to a disorderly re-pricing of carbon-intensive assets and a negative supply shock (transition risks). Climate-related disclosure could facilitate an orderly transition to a low-carbon economy if it helps a wide range of investors better assess their financial risk exposures.