The involvement of central banks in fighting climate change has been met with criticism, but François Villeroy de Galhau, the governor of France's central bank and a member of the European Central Bank's Governing Council, believes it is a "must have" focus. Speaking at the City Week conference in London, Villeroy stated that "climate-related risks are clearly among the long-term risks to which financial institutions are exposed," and that "it is not a 'nice to have' or part of a corporate social responsibility policy, but a 'must have'". He emphasized that climate change affects the level of prices and activity, and thus it is not a mission creep or a politicization of their mandate but rather a "core business and core duty".
While some central bankers, such as the head of the U.S. Federal Reserve, Jerome Powell, have argued that central banks should stick to their core mandate, Villeroy pushed back against such views, stating that central banks and others should come up with better models of how climate change is likely to alter economies. He cited the need for shorter-term scenarios with a five-year time horizon because climate change is accelerating.
Villeroy pointed to the Network for Greening the Financial System, which includes most of the world's central banks and multilateral lenders, as a critical body in publishing a "conceptual framework" by the end of the year. The Network is also aiming to release short-term climate change scenarios by the end of 2024 that will incorporate tougher "shocks" and directly explore the potential impacts of climate change on inflation.
