Climate Risk and Macroprudential Regulation
Monica Varlese, Simone Taddeo

Abstract
Global economies were clearly left unprepared by the climate crisis outbreak. Climate risks may entail catastrophic financial risks that undermine macroeconomic and financial stability. The macroprudential regulation in force and the envisaged instruments are not sufficient to implement a "green" macroprudential policy to mitigate climate risks, necessary for a transition towards a low-carbon economy. In this uncertain context, is growing acknowledgment among policymakers’ new measures need aimed at considering the systemic nature of climate risk should arise. Central banks should promote more sustainable finance, including climate risks in pursuing their objectives as well. This paper explores financial climate-related risks features and their measurement instruments adopted by individual institutions. Moreover, it highlights limits of regulation in force in the face of such risks. This will provide readers a clear picture of this topic and point to potential insights useful for a macroprudential regulation in view of challenges associated with climate change.

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