Do central banks have a mandate to act on climate change? Part I

Over the past century, a number of conventions have developed that define the roles and responsibilities of central banks and financial regulators.  In most countries these institutions play a critical role, nominally independent of the legislative and executive branches of government, in managing the performance of the economy and controlling inflation through the business cycle.

In recent years, primarily since Mark Carney’s seminal speech on climate change, officials have claimed that climate sustainability falls within the existing mandate of central banks to ensure financial stability.   

These claims – and their potential implications – should be considered very carefully.  Are the claims justified?  Does delegation of authority to act on climate-related matters improve our ability to tackle global warming?  Should the environmental sustainability mandate be made explicit?  Should the mandate be shared with other government agencies?  Might expansion of the mandate impact the central bank’s other responsibilities?

And critically, does tasking financial regulators to address climate change allow elected representatives to shirk responsibility for tackling the most critical issue we face?