Improving climate risk data has become a universally acknowledged imperative. This priority is shared by central banks, which in recent years have been actively exploring ways to enhance their policymaking frameworks to better address the impact of climate change. The focus has been on assessing the broad spectrum of data-related issues and developing adequate solutions.
While important initiatives are under way at both national and international levels to identify and address climate risk-related information needs, significant challenges remain in terms of data availability, reliability and comparability. Data gaps are particularly pronounced for forward-looking indicators of physical climate risks, as well as for the assessment of progress associated with net zero transition policies.
Moreover, the climate risk landscape is constantly evolving, indicating that environmental impacts will materialise gradually over time and may follow non-linear patterns. Climate risk outcomes will depend on the development of both physical risks (such as increased flooding and heatwaves) and transition risks (such as bank exposures to carbon-intensive sectors). These outcomes will be influenced by evolving national priorities, which will, in turn, significantly affect policies and progress.
The identified data-related challenges call for ambitious statistical strategies to successfully bridge existing data gaps. While information should be available at different aggregation levels to reflect the variety of stakeholder needs, specific attention has to be given to developing global climate metrics that are essential for rigorous impact and policy evaluation. Ideally, such metrics should be publicly available, reliable, comprehensive and comparable. Furthermore, the importance of exchanging national experiences in addressing a truly universal issue like climate change cannot be overstated. This serves as a reminder that global progress cannot be achieved without active and close cooperation between critical national and international stakeholders.
Central banks have already taken many steps to address climate data issues, leveraging their unique perspective as both producers of official statistics and users of robust and trustworthy evidence in fulfilling their public mandates. A driving factor is that climate change is expected to gradually affect their core policies, especially in the areas of monetary and financial stability, as well as their roles as asset and reserve managers and supervisors of payment systems. In particular, climate change may affect inflation by disrupting supply chains, reducing output in key sectors such as agriculture and increasing overall production costs. Additionally, both transition and physical risks could pose significant challenges to the pursuit of central banks’ financial stability mandates. Climate risk is also a crucial consideration for central banks tasked with the microprudential supervision of financial institutions, potentially necessitating a revision of regulatory frameworks to ensure that vulnerabilities in the financial system are properly identified, monitored and mitigated. Lastly, a growing number of central banks are taking specific policy actions to support the development of green finance as a means of mitigating the impact of climate change.
Looking ahead, and reflecting their important roles in today’s economies, central banks can be instrumental in spurring global efforts to overcome climate data gaps. They are well placed to take stock and make sense of the growing related data available from different sources and in various formats. They can also more actively contribute to the compilation of necessary analytical indicators, particularly in the context of their oversight role of the financial system. Additionally, central banks have been actively fostering coordinated data work on climate risk within national data ecosystems, especially in collaboration with their counterparts in national statistical offices.
In addition, a key part of central banks’ efforts to close climate risk-related data gaps will continue under the umbrella of international initiatives, employing a multifaceted approach. A first objective is to finalise data compilation exercises organised globally, particularly in the context of the G20 Data Gaps Initiative (DGI). A second focus is to develop common methodologies and experimental indicators, including forward-looking ones, by promoting harmonised statistical frameworks and practices. Third, enhanced information-sharing (including data, frameworks and methodologies) is essential for accurately assessing the environmental footprint of economic activities in today’s globalised world. Lastly, technological innovation offers promising solutions to overcome climate-related data gaps, and central banks have been playing an active role in utilising new data sources and tools in this endeavour.