Central Bank sets out supervisory expectations of regulated firms regarding climate change, and reaffirms own commitment to take action

• Central Bank issues pledge on climate change action and endorses the NGFS ‘Glasgow Declaration’ made today
• As we transition to a carbon neutral future, the financial system will play a pivotal role in serving the needs of consumers and the wider economy
• Addressing climate change is a strategic priority for the Central Bank

The Central Bank’s mission is to serve the public interest by maintaining monetary and financial stability while ensuring that the financial system operates in the best interests of consumers and the wider economy. The financial system will play a pivotal role in serving the needs of consumers and the wider economy as we transition to a carbon neutral future.

Governor Gabriel Makhlouf has today (3 November 2021) written to regulated financial services providers (PDF 4.43MB) to highlight the statutory obligations and related supervisory expectations relating to climate and sustainability issues.

In the letter the Governor acknowledged that addressing these issues will be challenging for firms, but climate change requires action from all participants in the financial sector, and ownership of the climate agenda by regulated financial service providers is now critically important.

The Central Bank has also today reaffirmed its commitment to redouble its efforts to take action in respect of climate change (PDF 120.67KB). As a member of the Network for Greening the Financial System (NGFS), the Central Bank also recognises the need for international cooperation in tackling the climate challenge and endorsed the NGFS ‘Glasgow Declaration’ made today.

Commenting on the releases Governor Makhlouf said “Central banks have an important role in mitigating the effects of climate change. Climate change is already having profound effects on the world's societies and economies but we can alter its future path if we start taking action now as we transition to a carbon neutral society.

“In the Central Bank we will play our part and lead by example in our own actions, as well as delivering on our mandate to ensure that the financial system is resilient to climate-related risks and ready to support the transition to a more sustainable world. We have established a dedicated Climate Change Unit to bring additional focus to our work in this area.

“In addition, at the European Central Bank, climate change was a key component of our monetary policy Strategy Review. Following the conclusion of the review earlier this year climate change has been incorporated into the monetary policy framework. As it poses significant risk to the stability of the financial system and firms within it, it is essential that we understand these risks and set out policy options to tackle them.”

The Central Bank also announced the establishment of a Climate Risk and Sustainable Finance Forum (the Climate Forum) to bring together stakeholders to build a shared knowledge and understanding of the implications of climate change for the Irish financial system. The Climate Forum’s first meeting is expected to take place in the coming months, with further details to follow.

Notes to Editor

The 26th UN Climate Change Conference (COP26) is taking place in Glasgow from 1 - 12 November 2021.

The Central Bank of Ireland is a member of the Network for Greening the Financial System (NGFS) since 2019. The NGFS launched at the Paris One Planet Summit on 12 December 2017 and is a group of central banks and supervisors willing, on a voluntary basis, to share best practices and contribute to the development of environment and climate risk management in the financial sector and to mobilise mainstream finance to support the transition towards a sustainable economy.

Read more about climate change risk and the role of central banks in Governor Makhlouf’s blog: Climate Change: Towards Action (31 March 2021).

Read about the ECB’s action plan to include climate change considerations in its monetary policy strategy (8 July 2021).