Central Banks need to take action to address climate change risks - Makhlouf

01 June 2022 Press Release

Gabriel Makhlouf

Governor of the Central Bank of Ireland Gabriel Makhlouf discussed the role of central banks in tackling climate change in an address on Tuesday evening to the Waddesdon Club of Financial Leaders, a Chatham House initiative to encourage climate leadership in financial and economic policymaking. 

Speaking at the event, Governor Makhlouf said: “When it comes to climate change, there has been considerable debate about the role of central banks.  Questions have been asked about whether actions on climate change would interfere with their legal mandate, or indeed if central banks would be reaching into areas that should only be addressed by democratically elected officials.

“In my view, a broad consensus has now been reached: climate change is affecting the capacity of central banks to meet their mandates.  So central banks have to play a role in tackling the climate challenge, along with all actors in society, but the time for that action is running out.

“Just two weeks ago the latest warning came in the form of a report from the World Meteorological Organization.  The report is stark in its findings: key climate change indicators – greenhouse gas concentrations, sea level rise, ocean heat and ocean acidification – all set new records in 2021. We are also getting measurably closer to temperatures reaching 1.5oC in the coming years.  To put it quite simply, the world is off course. 

“Central banks need to play their part and lead by example in their own actions, as well as deliver on their mandate to ensure that the financial system is resilient to climate-related risks and ready to support the transition to a more sustainable world.

“We need to take action to address the risks.  But let us also be clear: central banks cannot solve the problem of climate change on their own.  The challenge requires action on the part of the whole community, businesses, households, as well as policymakers.

Commenting after the event, Governor Makhlouf said: “Speaking for my own organisation, the Central Bank of Ireland, we have identified the risks of climate change and supporting the transition to a carbon-neutral economy as an integral theme in our multi-year Strategy, and we have established a dedicated Climate Change Unit to help steer that agenda and bring additional focus to our work in this area.

“Only recently we have had a significant cross-industry response to our call for expressions of interest to join our Climate Forum. It will be a consultative forum providing a space for cross-sectoral discussions among representative bodies, financial sector participants, climate change experts and the Central Bank, and I look forward to working with and learning from the members.”