Readiness Support for Greening Central Banks

The physical risks of climate change and an uncoordinated transition to a net zero economy have the potential to destabilize financial markets and significantly affect the global economy. A changing climate poses numerous risks to the financial sector, such as sharp falls in asset prices, reduced companies’ profitability, shrinking public finance revenue sources and increased costs to the insurance industry.

At the same time, the financial sector plays a central role in mobilizing the trillions needed to achieve countries’ Nationally Determined Contributions (NDCs) and decarbonize the economy through Long-Term Low Emissions Development Strategies (LT-LEDS) by midcentury.  

Central banks and financial supervisors are uniquely positioned to map, assess and tackle the financial and economic risks posed by climate change, while also identifying and creating mechanisms for a low carbon transition.​ In 2021-2022, the NDC Partnership Support Unit consulted more than 80 representatives from its members that emphasized (i) the critical role that Central Banks play in the climate change agenda, and (ii) the need to provide in-country technical assistance to strengthen national capacities to mitigate risks and catalyze low-carbon and resilient investments.