Toolbox for Sustainable Central Banking

In 2020, central banks and financial supervisors played a crucial role in shaping the response to the crisis brought about by the Covid-19 pandemic. As economies move from crisis response into recovery, INSPIRE is investigating how financial institutions’ sustainable crisis response measures can be designed to deliver long-term sustainable practice.

To maintain financial stability, central banks and financial supervisors introduced a plethora of conventional and unconventional policy tools in response to the pandemic. Many of the tools that have been applied could be calibrated in ways that account for climate- and sustainability-related goals. Doing this will enable financial institutions to avoid the build-up of risks in the financial system. Calibration would also align the actions of central banks and supervisors with the growing call from national governments, international organisations, and the NGFS for a green and inclusive recovery from Covid-19.

To facilitate this tuning, INSPIRE investigates how a sustainable recovery can be engineered by building upon the immediate response of central banks and financial supervisors. It aims to outline the implications for a long-term alignment of financial policy and practice with sustainability risks and goals.