CETEx in Frankfurt: Climate, Nature and Monetary Policy Conference, 5-6 May 2026

On 5 and 6 May, CETEx was pleased to co-organise the Climate, Nature and Monetary Policy Conference with the European Central Bank (ECB) and the Frankfurt School of Finance & Management.

In recent years, research connecting climate change, nature degradation and the green transition to price stability and monetary policy has made substantial strides. This conference gave such work a platform, reflecting the significance of that progress through opening remarks by ECB President Christine Lagarde, keynote speeches by LSE’s Nobel Laureate in Economics Philippe Aghion and ECB Chief Economist Philip Lane, research presentations from leading academics, and two high-level policy panels on monetary strategy and monetary operations.

Opening the conference, President Lagarde captured the spirit that brought the room together: at a moment when the climate debate risks becoming less clear-eyed, she argued, rigorous and impartial analysis from research institutions and central banks matters more than ever to “distinguish the signals of science from the noise of politics”. The mission of both CETEx and this conference is to build the evidence base that policymakers need to navigate that debate with confidence.

Insights from the research

The research sessions covered ground that is increasingly relevant to price stability and monetary policy. Key findings included:

• Fiscal support is critical to economic recovery from natural disasters in the US.
• Nature-related shocks can put significant upward pressure on agricultural prices.
• Water stress acts as a supply shock, lowering output while increasing inflation.
• Uncertainty around climate policy generates adverse supply shocks.
• Interest rates affect aggregate supply-side energy efficiency.

Papers on nature degradation were new to the conference agenda this year. They featured rich discussions that highlighted the importance of considering not only the impacts of land-use change and biodiversity loss but also how nature degradation leads to negative outcomes linked to pollination, invasive species and water. These papers broke new ground in exploring the relevance of environmental degradation to monetary policy, moving beyond temperature changes and extreme weather to begin to capture the more complex macroeconomic dimensions of nature loss.

Panel discussions

The two policy panels moved the discussion on from research findings to their implications for monetary strategy and operations.

The monetary strategy panel discussed the implications of climate and nature shocks for monetary frameworks. There was broad agreement that these shocks have structural as well as cyclical characteristics and, depending on the type of shock, may persistently impact the supply side of the economy. Beyond that agreement, different perspectives were shared on how to handle recurring negative supply shocks associated with climate change, including on questions about the extent to which climate-related inflation can be looked through or whether it might sometimes demand a more active policy response.

The monetary operations panel focused on the integration of climate and nature considerations into the operational implementation of monetary policy, particularly collateral frameworks. There was a consensus that central banks will need to account for climate-related risks to their balance sheets if they are to fulfil their primary mandates, but differences in operational frameworks mean that bespoke approaches are needed in different jurisdictions. The panel acknowledged that central banks have already taken important steps towards this, including through collateral framework adjustments and portfolio tilting. Questions were raised about whether and how quickly these efforts should extend to a broader suite of assets and risks related to nature loss as the evidence base develops. The panel discussed data gaps and methodological challenges, emphasising that central banks should not let the perfect be the enemy of the good.

Looking ahead

Several of the questions discussed throughout the conference are core components of our research and policy agenda at CETEx, including:

• How do climate- and nature-related shocks affect price stability?
• What does climate and fiscal policy imply for monetary policy, and vice versa?
• How do monetary policy decisions affect investment in the green transition?
• Which monetary frameworks are fit for purpose in a world characterised by supply shocks?
• How can environmental risks be further integrated into monetary operations?

As President Lagarde noted, “in the face of such uncertainty, chance favours the prepared mind.” The central banking and research communities cannot set transition policy, but they can make the risks clear, sharpen the analytical foundations of decisions that do fall within their mandate, and create the conditions for better coordination with those who carry the primary responsibility.

We are grateful to our colleagues at the ECB and the Frankfurt School for their partnership in making this event possible, and to all the researchers and policymakers who contributed to a genuinely excellent two days of exchange.