The International Union for Conservation of Nature has highlighted that women are leading the way towards more equitable and sustainable solutions to climate change. Christine Lagarde, the first woman to serve as President of the European Central Bank, delivered a key note speech at the ILF conference on Green Banking and Green Central Banking in Frankfurt last month.
Christine Lagarde, President of ECB
Lagarde discussed the role of central banks in combatting climate change, and has enlarged the mandate of the ECB, and expanded traditional areas that monetary economists would examine. Whilst asserting that central banks cannot be responsible for climate policy, Lagarde told the Financial Times she wanted to ‘explore every avenue available in order to combat climate change’.
Within Europe, there is a willingness to fight climate change politically and fiscally, seeing policies focused on bringing a faster transition to a carbon neutral economy. Christine Lagarde highlighted three interlocking dimensions where we require rapid progress so that we can tackle climate change: including, informing and innovating.
The first dimension is including the true social and environmental cost of carbon into the prices paid by all sectors of the economy. This could be in the form of direct carbon taxes or comprehensive cap and trade schemes. The second dimension is greater information on the exposure of individual companies; currently, when available, information on the sustainability of financial products is inconsistent, incomparable and unreliable. This means climate risks are not adequately priced, and there is substantial risk for sharp future corrections.
The third and final dimension is substantial green innovation and investment, which is necessary for economic transformation. If we see simultaneous progress across these three dimensions, then there is an increased likelihood of substantial progress. Progress in one dimension will reinforce progress in the others, and expands the effectiveness of climate policy.
The ECB is launching a new climate change centre to bring together the different expertise and strands of work on climate across the Bank. This will provide a structure to deal with climate change in an efficient and determinative manner. Climate change is one of the greatest challenges of this century, and we must act. Lagarde pointed out this collaboration is vital, as ‘relying on just one solution, or on one party, will not be enough to avoid a climate catastrophe’.