Isabel Schnabel: From green neglect to green dominance?

Intervention by Ms Isabel Schnabel, Member of the Executive Board of the European Central Bank, at the "Greening Monetary Policy – Central Banking and Climate Change" online seminar, organised as part of the "Cleveland Fed Conversations on Central Banking", Frankfurt am Main, 3 March 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Climate change is one of the biggest challenges that humankind is facing. It exposes our society andeconomy to substantial risks – both physical risks resulting from the greater incidence of climate-relateddisasters, and transition risks arising from policy responses – that could potentially impair the balancesheets of households, firms, financial institutions and central banks.

There can be no doubt that climate change also poses risks for price stability, for example by hamperingmonetary transmission due to stranded assets, by affecting potential growth and the natural real interestrate, or by causing greater macroeconomic volatility. It is becoming increasingly clear that these risks willnot materialise in the distant future but much faster than expected. The tragedy of an alleged long horizon is increasingly turning into a tragedy of having too little time to act.