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The Role of Bank Regulators in the Promotion of Green and Climate Finance

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Sustainable Finance and ESG

Abstract

Over the past years, interest has increased in including environmental and climate-related issues in central banks, financial regulators, and supervisors’ activities. The scientific discussion and actions taken by these institutions are presented in this chapter. It describes how central banks are increasingly seen as key players in advancing regulations supporting a low-carbon or “net-zero” agenda and illustrates future policy directions and the new policy tools that central banks and financial regulators need to consider as climate change and its economic consequences are anticipated to generate new risks for financial markets.

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Notes

  1. 1.

    Following existing literature (D’Orazio, 2021, 2022; D’Orazio & Thole, 2022; Krogstrup & Oman, 2019), the climate-related financial policies considered in this study include five policy areas as described in Fig. 1.

  2. 2.

    The CRFPI is a composite index for assessing, quantifying, and comparing international engagement in climate-related financial policymaking. For a comprehensive description of the methodology and results, see D’Orazio and Thole (2022).

  3. 3.

    They “[…] should highlight at any given point in time, from now until 2050, the bank’s alignment and potential divergences with the relevant policy objectives through which the EU implements the Paris Agreement. […] should be part of a bank’s strategy-setting and be closely linked to its business model and business plan. It should contain concrete intermediate milestones from now until 2050 and the associated key and performance indicators so that the bank’s management and the competent authorities can understand the risks arising from a possible misalignment with the transition path. If banks fail to meet these milestones, competent authorities – including prudential supervisors – will have to take appropriate measures to ensure that this failure does not result in financial risks.”

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Authors and Affiliations

  1. Chair of Macroeconomics, Ruhr-Universität Bochum, Bochum, Germany

    Paola D’Orazio

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  1. Paola D’Orazio
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Correspondence to Paola D’Orazio .

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Editors and Affiliations

  1. Department of Economics, University of Crete, Rethymno, Greece

    Chrysovalantis Gaganis

  2. Montpellier Business School, Montpellier, France

    Fotios Pasiouras

  3. School of Accounting, Economics and Finance, University of Portsmouth, Portsmouth, UK

    Menelaos Tasiou

  4. School of Production Engineering and Management, Technical University of Crete, Chania, Greece

    Constantin Zopounidis

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D’Orazio, P. (2023). The Role of Bank Regulators in the Promotion of Green and Climate Finance. In: Gaganis, C., Pasiouras, F., Tasiou, M., Zopounidis, C. (eds) Sustainable Finance and ESG. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-24283-0_8

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