Climate and nature fall ‘squarely within’ central bank mandates, says ECB’s Elderson

Key points:

 

• The ECB stresses that managing climate and nature risk falls squarely within central bank mandates to safeguard financial stability and inflation.

• Transitioning to clean energy strengthens national security, boosts competitiveness and shields economies from volatile fossil fuel price shocks.

• Officials warn that capital markets and stable policy are urgently needed as the 1.5C carbon budget runs out.

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Accounting for climate and nature risks is a core part of central bank mandates, European Central Bank (ECB) executive board member Frank Elderson said on Monday. 

“As climate and nature risks increasingly affect productivity, growth, inflation and the resilience of the financial system, taking them into account falls squarely within our mandate,” he said. 

Speaking at the Bank for International Settlements Green Swan event in Manila, Philippines, Elderson highlighted that while a single event might not cause a macroeconomic crisis, as the Earth becomes warmer and nature degradation increases, it will affect core economic and financial drivers. 

Meanwhile ECB governing council member Olaf Sleijpen warned that the window to limit global warming was closing fast.  

“Scientific evidence shows that the remaining carbon budget consistent with limiting global warming to 1.5C is now almost exhausted,” Sleijpen, who is also head of the Network for Greening the Financial System, said at the same event. “We are no longer choosing between success and failure, but between an outcome that is bad but still manageable, and an outcome that we can no longer manage.”

A competitive transition 

 

Elderson noted that the green transition is not separate from other pressing issues like resilience, energy security and competitiveness, but that “if managed well, the transition, which includes both adaptation and mitigation, can reinforce all three.”

He said it’s not a question of transition to a green economy, but about “who will be well positioned as we move forward along the transition path.”

Reducing dependence on fossil fuels, he added, will strengthen the autonomy of countries and make it easier for them to weather economic shocks from energy price volatility. Countries worldwide have faced hardships from increasing energy prices caused by Iran’s closure of the Strait of Hormuz in response to US and Israeli strikes on 28 February 2026. 

Elderson said a more electric, renewables-based energy system could also indirectly affect headline inflation over time. 

“A successful transition is not merely about avoiding future costs. It is also about capturing opportunities. This makes the case for clean energy a macroeconomic argument,” he said.

But there is still a barrier to financing the green transition, partly due to access to finance and partly to political, economic and regulatory uncertainty, Elderson said. 

Banks, especially for Europe, will play a significant role in the transition, along with deeper capital markets, but international capital flows and cross-border cooperation are also needed to level the playing field with “common standards, credible international commitments and mutual trust,” he said. 

Still, Elderson cautioned against “backtracking on legislative commitments on which firms have based long-term investment decisions,” taking a subtle stab at the European Union’s decision to water down its sustainable reporting directives, which the ECB had opposed. 

“Climate change and nature degradation may be a certainty in an uncertain world, but how we respond to them remains very much a matter of choice,” he said. 

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