A new paper explores how central banks are increasingly incorporating climate-related financial risks into monetary operations, and where further progress could be made.
The chapter, “Climate risk and central bank operations: evolving good practices and innovative approaches”, is authored by CETEx Executive Director Rob Patalano and Policy Analyst Enrique Serrano Rodriguez, with review contributions from Senior Policy Fellows David Barmes and Harriet Richards, and Policy Analyst Maria Waaifoort.
It forms part of Banco de España’s new Occasional Paper, Climate Risk and Sustainable Finance: Bridging Policy, Research and Practice, also published jointly with Funcas through its Papeles de Energía journal, which brings together contributions arising from the conference of the same name held in Madrid on 25 March 2026.
Building on the conference
The conference was organised by Banco de España together with the Network for Greening the Financial System (NGFS), CETEx and the TPI Global Climate Transition Centre.
It brought together central bankers, policymakers, academics and experts to examine how research and practical experience can help financial institutions address the challenges posed by climate change. Discussions spanned climate risks, adaptation and finance; banking risk management and supervision; central bank operations; and developments in climate and nature-related data and scenarios.
The new publication builds on these discussions, bringing together contributions from participants to examine how climate considerations are increasingly shaping financial policy and practice.
Climate risk and central bank operations
Drawing on discussion from the conference and developments across major central banks, the CETEx chapter examines the evolving integration of climate considerations into monetary operations and central bank balance-sheet management.
It highlights a gradual shift beyond climate-aligned asset purchases towards integrating climate considerations into collateral valuation and risk-management frameworks.
The authors review developments including climate-related asset purchase programmes, targeted refinancing operations and collateral frameworks, with particular attention to reforms introduced by the European Central Bank and Bank of England.
They argue that further progress could include:
– extending climate-risk methodologies to additional asset classes;
– strengthening coherence across existing monetary policy tools;
– incorporating physical climate risks more systematically; and
– beginning to address material nature-related financial risks.
The chapter concludes that, while operational and methodological challenges remain, experience across central banks increasingly demonstrates that climate and nature-related financial risks can be incorporated into monetary operations in ways consistent with central bank mandates and established risk-management objectives.