Central banks, financial supervision and the green transition

Greening monetary policy and financial regulation to accelerate a shift of financial flows in support of the ecological transition

About the project

In the face of accelerating environmental breakdown, financial flows must urgently realign away from ecologically damaging and towards sustainable activities. This project aims to accelerate this shift by influencing monetary policies and financial regulations undertaken by central banks, financial supervisors, and other relevant policymakers. Our research has built the case for policy interventions to be taken on a precautionary basis. This is justified by both the radical uncertainty of climate change and biodiversity loss and the catastrophic consequences of policy inaction. We have identified certain green financial policies as sensitive intervention points that have the potential to catalyse a green transition in the real economy, as well as avoid the emergence of ecological tipping points.

Over the course of this project, which was initiated in 2018, sustainability goals have steadily been moved up the agendas of financial policymakers, and IIPP research has had significant impact contributing to this progress. The ‘precautionary financial policy’ approach has been referenced in policy documents by the White House, the Network for Greening the Financial System (NGFS) and the Canadian Senate as well as individual central bank research. Our work on nature-related financial risks was also cited in the influential Dasgupta Review on the Economics of Biodiversity, and our researchers contributed substantially to a study group launched jointly by the NGFS and the INSPIRE research network on ‘Biodiversity and Financial Stability’. We continue to collaborate with a number of individual central banks, as well as working in close partnership with other universities, foundations, think tanks, and NGOs on this agenda.

Academic journal papers

Kedward, K., Zu Ermgassen, S., Ryan-Collins, J., & Wunder, S. (2023). Heavy reliance on private finance alone will not deliver conservation goals. Nature Ecology and Evolution; 1-3
Kedward, K., Ryan-Collins, J., & Chenet, H. (2022). Biodiversity loss and climate change interactions: financial stability implications for central banks and financial supervisors. Climate Policy, 1-19.
Bezemer, Dirk, Josh Ryan-Collins, Frank van Lerven, and Lu Zhang (2021). Credit policy and the ‘debt shift’ in advanced economies Socio-Economic Review 21, no. 1: 437-478. https://doi.org/10.1093/ser/mwab041
Chenet, H., Ryan-Collins, J., Lerven, F. van, (2021). Finance, climate-change and radical uncertainty: Towards a precautionary approach to financial policy. Ecological Economics 183, 106957. https://doi.org/10.1016/j.ecolecon.2021.106957
Campiglio, E., Dafermos, Y., Monnin, P., Ryan-Collins, J., Schotten, G., & Tanaka, M. (2018). Climate change challenges for central banks and financial regulators. Nature climate change, 8(6), 462-468.

Book chapters

Ryan-Collins, J. (2022). Financial regulation, uncertainty and the transition to a net-zero-carbon economy. In L. -. P. Rochon, S. Kappes, G. Vallet (Eds.), Central Banking, Monetary Policy and the Environment. Elgaronline. https://doi:10.4337/9781800371958.00016
Kedward, K. and Ryan-Collins, J. (2022). A Green New Deal: Opportunities and Constraints, in: Arestis, P., Sawyer, M. (Eds.), Economic Policies for Sustainability and Resilience, International Papers in Political Economy. Palgrave Macmillan, Cham.

Working papers

Ryan-Collins, J., Kedward, K., & Chenet, H. (2023). Monetary-fiscal policy coordination: Lessons from Covid-19 for the climate and biodiversity emergencies. UCL Institute for Innovation and Public Purpose WP, 2023/4, https://dx.doi.org/10.2139/ssrn.4419077
Kedward, K., and Ryan-Collins, J. (2022). From financial risk to financial harm: exploring the agri-finance nexus and drivers of biodiversity loss. UCL Institute for Innovation and Public Purpose, Working Paper Series (IIPP WP 2022-05).
Kedward, K., Gabor, D., & Ryan-Collins, J. (2022). Aligning finance with the green transition: From a risk-based to an allocative green credit policy regime. Available at SSRN 4198146. https://dx.doi.org/10.2139/ssrn.4198146
Kedward, Katie and zu Ermgassen, Sophus O. S. E. and Ryan-Collins, Josh and Wunder, Sven, Nature as an Asset Class or Public Good? The Economic Case for Increased Public Investment to Achieve Biodiversity Targets (December 19, 2022). Available at SSRN: https://ssrn.com/abstract=4306836
Ford, G., Kedward, K., Krebel, L., Ryan-Collins, J., Vaccaro, J., & van Lerven, F. (2022). Fat Tails, Tipping Points and Asymmetric Time Horizons: Dealing With Systemic Climate-Related Uncertainty in the Prudential Regime. (October 12, 2022). Available at SSRN 4245871
Mikheeva, Olga and Ryan-Collins, Josh, Governing Finance To Support The Net-Zero Transition: Lessons From Successful Industrialisations (January 21, 2022). UCL Institute for Innovation and Public Purpose, Working PaperSeries (No.WP 2022/01). Available at: https://www.ucl.ac.uk/bartlett/public-purpose/wp2022-01
Kedward, K., Ryan-Collins, J. and Chenet, H. (2020). Managing nature-related financial risks: a precautionary policy approach for central banks and financial supervisors. UCL Institute for Innovation and Public Purpose, Working Paper Series (IIPP WP 2020-09).

Policy briefs and reports

Kedward, K, Gabor, D. and Ryan-Collins, J (2022) A modern credit guidance regime for the green transition, SUERF policy note, no 294.
Kedward K, Ryan-Collins J, Chenet H, van Lerven F. (2022). Developing a precautionary approach to financial policy – from climate to biodiversity. The London School of Economics and Political Science, INSPIRE Sustainable Central Banking Toolbox, Policy Briefing Paper. Available at: https://www.lse.ac.uk/granthaminstitute/wp-content/uploads/2022/04/INSPIRE-Sustainable-Central-Banking-Toolbox-Policy-Briefing-Paper-2.pdf
Kedward, K., Buller, A. and Ryan-Collins, J. (2021). Quantitative easing and nature loss: exploring nature-related financial risks and impacts in the European Central Bank’s corporate bond portfolio. UCL Institute for Innovation and Public Purpose, IIPP Policy Report (IIPP 2021/02). Available at: https://www.ucl.ac.uk/bartlett/public-purpose/pr21-02
Kedward, K., Ryan-Collins, J., Chenet, H., 2021. Understanding the financial risks of nature loss: exploring policy options for financial authorities (No. No. 115), SUERF Policy Briefs. SUERF: The European Money and Finance Forum. https://www.suerf.org/suer-policy-brief/27301/understanding-the-financial-risks-of-nature-loss-exploring-policy-options-for-financial-authorities
Ryan-Collins, J. (2019). Beyond voluntary disclosure: why a ‘market-shaping’ approach to financial regulation is needed to meet the challenge of climate change [Online]. SUERF: The European Money and Finance Forum. https://www.suerf.org/docx/f_a821a161aa4214f5ff5b8ca372960ebb_4805_suerf.pdf.

IIPP blogs

Media and events