Fostering Green Investments and Tackling Climate-Related Financial Risks: Which Role for Macroprudential Policies?

LEM Working Paper Series ISSN (Online) 2284-0400 2018/33

36 Pages Posted: 13 Dec 2018

See all articles by Paola D'Orazio

Paola D'Orazio

Ruhr University of Bochum - Macroeconomics

Lilit Popoyan

Scuola Superiore Sant'Anna, Laboratory of Economics and Management (LEM)

Date Written: November 12, 2018

Abstract

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.

Keywords: Climate Change, Climate Finance Gap, Banking Regulation, Macroprudential Policy, Central Banking, Climate-finance risk

JEL Classification: E50, E52, G28, Q50, Q58

Suggested Citation

D'Orazio, Paola and Popoyan, Lilit, Fostering Green Investments and Tackling Climate-Related Financial Risks: Which Role for Macroprudential Policies? (November 12, 2018). LEM Working Paper Series ISSN (Online) 2284-0400 2018/33, Available at SSRN: https://ssrn.com/abstract=3106350 or http://dx.doi.org/10.2139/ssrn.3106350

Paola D'Orazio (Contact Author)

Ruhr University of Bochum - Macroeconomics ( email )

Universitaetsstrasse 150
GC/2-162
Bochum, 44801
Germany

HOME PAGE: http://econhoratio.org

Lilit Popoyan

Scuola Superiore Sant'Anna, Laboratory of Economics and Management (LEM) ( email )

Piazza Martiri Della Liberta 33
Pisa, Pisa 56127
Italy

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