Sustainable finance and central banks. New players in a changing financial geography

Abstract

In a changing scenario, between climate crisis, pandemic crisis and the current conflict, central banks are taking action for a greening of monetary policy. The contribution aims to investigate the new role of central banks in addressing climate change, and the concrete effects of their actions, taking into account possible contradictions, particularly related to the principle of market neutrality. For this purpose, a review of the literature on financial geography is proposed, combining sustainability and finance. Subsequently, the concept of climate risk in finance and the ECB’s commitment in relation to the dissemination of knowledge and risk reporting are examined. If the climate risk were appropriately priced, the most exposed activities and companies would be less appreciated, pushing the financial system towards a greater sustainability. In such a situation, central banks could pursue both market and carbon neutrality.