ECB’s Elderson: Climate Risk Mitigation Could Help Achieve Price Stability

22 November 2023

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Executive Board member Frank Elderson on Wednesday said that countering climate and nature-related risks could help central banks achieve price stability.

In a speech at the Bertelsmann Stiftung foundation in Berlin, the text of which was posted to the website of the ECB, Elderson said that ‘in the pursuit of price stability, central banks benefit from mitigation of climate and nature-related risks, which – as analysis consistently shows − is best ensured by securing a timely and orderly [green] transition.’

‘[T]he risk of not delivering on our mandate is real if we don’t take climate and nature into consideration. Preserving price stability means preserving climate and nature stability’, he said.

Consequences of the climate and nature crises included, among others, macroeconomic volatility and a decline of the equilibrium rate of interest, he said, which were relevant to monetary policy and to the ECB’s mandate.  

It would be important to consider the decarbonisation of the assets held by the ECB, he said, but that would also require action by the issuers of those bonds.

‘In my view, when there is no clear monetary policy rationale for preferring domestic sovereign bonds, we should contemplate increasing the share of European Union supranational bonds in our total bond holdings to avoid potential climate and nature-related risks and to better align our balance sheet with the general economic policies in the EU’, he said.