2018/35 | LEM Working Paper Series | ||||||||||||||||
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Fostering green investments and tackling climate-related financial risks: which role for macroprudential policies? |
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Paola D'Orazio and LIlit Popoyan |
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Keywords | |||||||||||||||||
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Climate Change, Climate Finance Gap, Banking Regulation, Macroprudential Policy, Central Banking, Climate-nance risk.
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Abstract | |||||||||||||||||
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While there is a growing debate among researchers and practitioners on
the possible role of central banks and financial regulators in
supporting a smooth transition to a low-carbon economy, the
information on which macroprudential instruments could be used for
reaching the "green structural change" is still quite
limited. Moreover, the achievement of climate goals is still affected by
the so-called "green finance gap". The paper addresses these issues by
proposing a critical review of existing and novel prudential
approaches to incentivizing the decarbonization of banks' balance
sheets and align finance with sustainable growth and development
objectives. The analysis carried out in the paper allows understanding
under which conditions macroprudential policy could tackle climate
change and promote green lending, while containing climate-related
financial risks.
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