Under all possible scenarios, climate-related risks will have consequences for the economic outlook, for the financial system in which central banks operate and, thus, for the conduct of monetary policy. The timing and severity of these consequences depend on how swift and effective transition policies are. Moreover, climate change poses new financial risks to central banks’ monetary policy operations. Climate-related financial risks could impact directly on both central bank counterparties and the financial assets used in monetary policy operations (as collateral for credit operations or for
As a result, climate-related shocks could generate financial losses for central bank balance sheets and, in extreme cases, they could affect the smooth implementation of monetary policy by exposing various monetary policy transmission channels to the impacts of physical and transition risks.
The entire technical document can be found here.