Green central banking and regulation to foster sustainable finance

Central banks and financial regulators have begun to discuss prudential policy and take measures to cope with climate-related financial risks including climate scenario analysis and / or stress test. Moreover, there are growing discussions on how to include climate risks with respect to the capital adequacy requirements regulation for banks in the Basel framework. Central banks are also encouraged to lead by example through disclosing the impact of climate risks on central banks’ own balance sheets, setting a greenhouse gas (GHG) emission reduction target on their operations, and adjusting the composition of various domestic and foreign assets held by central banks for non-monetary and monetary policy objectives. The report provide an overview of climate-related approaches and practices undertaken by central banks and financial regulators that have become more visible in recent years.