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The Geography of Climate Change Risk Analysis at Central Banks in Europe

Author

Listed:
  • Csaba Burger

    (Magyar Nemzeti Bank (the Central Bank of Hungary))

  • Dariusz Wojcik

    (University of Oxford, School of Geography and the Environment)

Abstract

Incorporating climate change considerations in central bank decisions has been fraught with legal and technical controversies. Legal, because interpretations of central bank mandates in relation to sustainability has been widely cited as hurdles to the discussion of climate change; and technical, because no methodology used to exist to assess and to measure the impact of climate risks on financial stability. This paper first analyses the spatial and temporal process climate change-related risk analysis spread among central banks by text mining - counting relevant bigrams - in 941 European financial stability reports of 39 central banks in Europe. It then maps climate risk relevant references of these reports. The study argues that geographical proximity played a significant role in the spread of the climate friendly central bank mandate interpretations. It also shows that the ECB, together with representatives of EU national central banks and their technical know-how, played a pivotal role in turning an innovation from being a novel research method into an accepted analytical framework. At the beginning of 2023, it now paves the way a towards a Basel-conform banking regulation within the EU, which reflects climate change risks too.

Suggested Citation

  • Csaba Burger & Dariusz Wojcik, 2023. "The Geography of Climate Change Risk Analysis at Central Banks in Europe," MNB Occasional Papers 2023/150, Magyar Nemzeti Bank (Central Bank of Hungary).
    • Handle: RePEc:mnb:opaper:2023/150
    as

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    File URL: https://www.mnb.hu/letoltes/mnb-op-150-final-1.pdf
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    References listed on IDEAS

    as
    1. Stefano Battiston & Antoine Mandel & Irene Monasterolo & Franziska Schütze & Gabriele Visentin, 2017. "A climate stress-test of the financial system," Nature Climate Change, Nature, vol. 7(4), pages 283-288, April.
    2. Wolfgang Pointner & Doris Ritzberger-Grünwald, 2019. "Climate change as a risk to financial stability," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 38, pages 30-45.
    3. Robert Vermeulen & Edo Schets & Melanie Lohuis & Barbara Kolbl & David-Jan Jansen & Willem Heeringa, 2018. "An energy transition risk stress test for the financial system of the Netherlands," DNB Occasional Studies 1607, Netherlands Central Bank, Research Department.
    4. Alogoskoufis, Spyros & Dunz, Nepomuk & Emambakhsh, Tina & Hennig, Tristan & Kaijser, Michiel & Kouratzoglou, Charalampos & Muñoz, Manuel A. & Parisi, Laura & Salleo, Carmelo, 2021. "ECB’s economy-wide climate stress test," Occasional Paper Series 281, European Central Bank.
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    More about this item

    Keywords

    financial geography; central bank mandates; climate change; financial stability; text mining; bigram search; fiduciary duty;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy

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