The role of central banks has been debated for decades. In the late 1990s and early 2000s the focus became narrowly defined. The focus on one instrument – the policy rate – often seemed blunt but was largely effective.
Over the past decade, the central bank toolbox has expanded to include more varied and complex instruments. As recent global events have imposed new challenges on central banks, policy frameworks in some cases are also being rethought. One of the key changes today is climate change, which poses the question: what should central banks do to combat climate risk?
This paper discusses the view that central banks can and should have an impact, using their toolboxes to address not only climate risks but the path to a broader sustainability agenda.
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