On January 25, 2021, the European Central Bank (ECB) announced that it has set up a Climate Change Centre to bring together the work on climate issues in different parts of the bank.

The Climate Change Centre will shape and steer the ECB’s climate agenda internally and externally, building on the expertise of all teams already working on climate-related topics. Its activities will be organized in workstreams, ranging from monetary policy to prudential functions, and supported by staff that have data and climate change expertise.

The Climate Change Centre, with an expected staff of 10 people, will start its work in early 2021 and report to the ECB President, Christine Lagarde.

The Climate Change Centre will focus on five workstreams, including:

  • Financial stability and prudential policy;
  • Macroeconomic analysis and monetary policy;
  • Financial market operations and risk;
  • EU policy and financial regulation; and
  • Corporate sustainability.

In progressing the above workstreams, this new initiative should draw upon the ECB’s four main areas of competence regarding climate change:

  • Economic analysis, in ensuring that climate change is taken into account in the ECB’s macroeconomic models, forecasting methods and risk assessments;
  • Banking supervision, in engaging with banks to raise awareness of climate risks and promote climate risk management;
  • Monetary policy and investment portfolios, in investing in green bonds; and
  • Financial stability, in measuring the risks posed to the financial system by climate change.

Given the importance of the EU to the global financial markets and this comprehensive approach to climate change across the ECB’s various functions, we expect central banks around the world to take note of this development and to look to the ECB for guidance in developing their own climate change strategies.