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How central banks should and shouldn’t tackle global warming

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NEW YORK – Central bankers have been dubbed “masters of the universe” for the tools and powers they have acquired since the financial crisis. Some of them now want to play a more active role in the fight against climate change.

Monetary authorities are right to be mindful of the way in which climate risk affects their mandate to ensure price stability and guard financial stability. But that is different from seeking to promote the shift to a “greener” economy, which is the role of government.

Earlier this month central bank governors from the United Kingdom, France and the Netherlands met in Amsterdam to discuss how to adapt regulation to the risks posed by climate change. Together with five other institutions (from China, Germany, Mexico, Singapore and Sweden), these central banks have formed the “Network for Greening the Financial System” (NGFS). This group has two objectives: sharing and identifying best practices in the supervision of climate-related risks, and enhancing the role of the financial sector in mobilizing “green” financing.

The first is entirely reasonable and consistent with the central banks’ traditional role. As Francois Villeroy de Galhau, governor........

© The Japan Times