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Podcast of the American think tank Center for Strategic and International Studies (CSIS) with the Governor of the Bank of Greece Yannis Stournaras

11/11/2020 - Articles & Interviews

You can listen here the podcast of the American think tank Center for Strategic and International Studies (CSIS) with the Governor of the Bank of Greece Yannis Stournaras, who talks with Nikos Tsafos (CSIS Energy Program) and Stephanie Segal (CSIS Economics Program) about the economic impacts of climate change, what the Bank of Greece is doing to help prepare the country for climate risks, and the role of central banks in addressing climate change.

Read the interview below:

CSIS Energy Security and Climate Change Program


Interviewee: Governor Yannis Stournaras, Bank of Greece

Interviewers: Stephanie Segal, CSIS Economics Program and Nikos Tsafos, CSIS Energy Security and Climate Change Program





The Bank of Greece published its first report on the economic impact of climate change nearly a decade ago. What risks does climate change pose for a country like Greece and how has this changed over the past decade? What analytical work is the Bank of Greece doing to understand and quantify this risk?




Indeed, as the Central Bank of Greece, we recognized over a decade ago the significant climate and environmental risks that the financial system is facing. It is for this reason that we have been systematically working on issues of sustainability and climate change since 2009, when we set up an interdisciplinary committee of scientists, the Climate Change Impacts Study Committee (CCISC), a workgroup dedicated to the study of climate change in Greece.

Our studies highlight the wealth of Greece’s natural resources, but also the risks posed to the country’s natural and human environment by climate change, which appears to be a major threat for almost all sectors of the Greek economy.[1] According to a vulnerability assessment[2], agriculture, tourism, coastal systems and water reserves will be considerably affected. Current projections are even more dire, and we expect this trend to continue, as climate change remains unabated.

Climate and sustainability have always been high on our agenda and I personally have been addressing those issues on every occasion.[3],[4] It is telling that the BoG, the ECB and the Bank of England, have been named the three most vocal central banks worldwide.[5]



The Bank of Greece objectives include price and financial system stability. Where does climate change fit within those priorities? Especially given other issues like Covid-19.




Climate-related risks are a source of financial risk. Both physical and transition risks, like more frequent and more extreme weather events or a late and abrupt transition to a low-carbon economy, could have a significant impact on the financial system. It is therefore within the mandate of central banks and supervisors to ensure that the financial system is resilient to these risks.


The COVID-19 pandemic has created unprecedented conditions that have underlined the climate crisis. The lockdowns are estimated to incur a reduction of 4-7% on global CO2 emissions for 2020.[6] Yet, to mitigate climate change and keep temperature below the 1,5 °C target, we would need at least a similar reduction, every year, until 2030. This is how drastic the necessary measures are – and the pandemic underlines the structural changes we need towards carbon neutral economy.


Yet, as every crisis presents an opportunity, the COVID-19 crisis presents an opportunity for a green recovery through the use of the Next Generation EU Fund, part of which is earmarked for green energy investments. This will facilitate the transition to a carbon neutral economy,[7] adapting to climate change and creating resilient infrastructures.


Over the next months and possibly years, it is estimated that countries will invest over $20 trillion to recover from the fallout of COVID-19.[8] These financial and investment decisions will determine to a great extent the future of our societies and our ability to respond to the environmental challenges that the world is already facing today.


Green recovery is an opportunity we cannot afford to miss.




Regarding the ECB's ongoing Strategy Review, how do you expect climate to factor into the Review and the ECB's mandate of price stability?




Central banks cannot stay behind when it comes to climate change and as part of the strategy review the ECB is indeed already exploring ways of taking the risk of climate change into account.[9]

There are three main ways through which central banks can address climate change.[10]

The first is through the definition of rules and standards, and research on the impact of climate change for financial markets and monetary policy. The second way central banks can contribute is by being an environmentally mindful and responsible investor, for example through pension fund investments and other non-monetary policy portfolios. The third is by considering climate change parameters for the design of monetary policy operations.

The Eurosystem is already buying eligible green bonds[11] as part of the corporate sector purchase programme and the pandemic emergency purchase programme. Yet, there is the question as to whether the Eurosystem should do more in greening its asset purchases, or in adjusting the conditions of its refinancing operations, including the collateral framework, to take risks related to climate change into consideration.[12] There are two opposing arguments on this question. The argument of market neutrality, that central banks would overstep their mandate if they were to discriminate among investors on the basis of considerations that fall into the realm of fiscal policy, and, the argument that central banks need to respond to market failures and address the risks that climate change poses to price stability when designing their policy instruments.[13]

It is clear however that since climate change poses risks to price stability, central banks could, within their traditional mandate, advance their efforts to support the transition to a carbon neutral economy and a resilient future.




As our energy system transitions to lower-carbon energy sources, there is a concern that assets might become stranded, jeopardizing the stability of the financial system; what can a central bank do to mitigate against this risk? Is there a role for stress tests related to climate? What other approaches might be advisable?




In the process of mitigating climate change, there are indeed certain risks. For example, transition risks arising from the adjustment to a carbon neutral economy, as assets can become stranded or businesses may incur costs and disruptions. Yet, a careful and timely transition will also open up opportunities, associated with innovation and new technologies, renewable energy products, energy saving investments, new infrastructure and new jobs.


Although methodologies for calculating climate-related risks for banks are still being developed, estimates suggest that the impact of these risks is likely to be significant. For example, the ECB has estimated that, on average, 15% of significant institutions’ exposures are to the most carbon-intensive firms and an abrupt transition to a low-carbon economy could have severe impact on climate-sensitive economic sectors.[14]


Climate change is the “mother of all externalities”.[15] It is both a tragedy of the commons[16] and what Mark Carney called a “tragedy of the horizon”, as the effects of climate change unfold over a much longer time than the horizon usually taken into account by investors, banks and policymakers. Banks measure and manage risks within a fairly short time frame as their standard modelling rarely goes beyond the next 12 months, giving a short-sighted approach. To integrate climate change considerations we need to combine short-term risk management tools with mechanisms that will allow us to better understand and manage risks that are driven by more structural and long-term changes in our economies.[17]


Due to the above externalities, markets do not price in climate change risks in a satisfactory way. In this context, the role of financial supervisors is to highlight the significance of climate-related risks. Proper risk measurement and disclosure will also allow both supervisors and banks to take climate risks into account, an ongoing process still at its early stages, yet increasingly crucial. It is obvious that it is in everyone’s interest to fight climate change. Central banks and supervisors are progressively looking into playing an active role in the debate and working with banks to prepare for and manage climate risks.




One major challenge we have is to channel capital to green industries and technologies; is it appropriate for monetary authorities and financial regulators to play a role in this process? Why prioritize green finance but not other priority investment areas (e.g., digital infrastructure)? Why not leave this to the market—and let fiscal authorities subsidize priority areas? To what extent might signaling regimes—like the taxonomy on sustainable finance—need to be supplemented by regulatory and supervisory efforts?




Green finance can advance governments’ climate policy, but it cannot replace it. It is, and always will be, a matter for politicians and policy makers to adopt effective climate action and make the necessary transition to a carbon neutral economy. Climate change is a long term problem and needs to be horizontally integrated into policymaking as its interlinkages affect all sectors of the economy.


Policies toward net zero emissions can be pursued at the same time as the world seeks to recover from the COVID-19 crisis, in a manner that supports economic growth, employment and income equality. According to a recent IMF study,[18] economic policies, such as carbon pricing, can help address climate change by affecting both the composition of energy (high- vs. low-emission sources) and total energy usage. Of course, as low-income households are more likely to be hurt by carbon pricing, governments should fully or partially rebate the carbon revenues through cash transfers to those affected, as we need to ensure both a growth-friendly and a just transition.

A green infrastructure push will also achieve two goals: first, it will boost global GDP and employment and second, it will increase productivity in low-carbon sectors, thereby incentivizing the private sector to invest in them and making it easier to adapt to higher carbon prices. If implemented, such policy programmes would put the global economy on a sustainable path by reducing emissions and limiting climate change.

In a nutshell, as the IMF study put it, decarbonisation policies do not hurt growth, if cleverly planned.

So yes, there is definitely a role for central banks but the main role in tackling climate change belongs with the governments. Central banks can help by considering how the physical and transition impact of climate change can be included in macroeconomic forecasting and financial stability monitoring. Also, central banks can help by integrating climate-related risks into prudential supervision, engaging with financial firms to ensure that climate-related risks are understood and integrated in risk management and investment. And, of course, central banks can help by including sustainability factors into own-portfolio management.


The common objective should be to strengthen the global response required to meet the goals of the Paris Agreement and enhance the role of the financial system in managing risks and mobilising capital for an environmentally sustainable development.




We know that climate change will disrupt lives and livelihoods—the economic value of activities might diminish, there will be catastrophic events that could trigger big insurance payouts, we will need to channel money to rebuild people’s lives and physical infrastructure. How does a central bank measure these risks and prepare adequately for them?




There is no question as to whether we should address climate change. The cost of doing nothing is just too high.[19] The adoption of policies and technologies leading to a carbon neutral world could mitigate the impact of climate change and offer opportunities for economic activity. Yet, even stopping all greenhouse gas emissions would not stop the climate change effects that are already occurring, and which are likely to continue for decades. The global temperature averages predicted hide even more extreme regional impacts and these extremes have far-reaching effects. In the EU alone, economic losses from weather and climate-related extremes are on average already EUR 12 billion per year.[20]


So, apart from financing the transition to a carbon neutral economy, it is imperative to also plan and finance climate change adaptation. Furthermore, current failure to implement climate action at a global level means that all nations will face the impact of the changing climate to a more or less extent. Adaptation policies and adaptation financing will help avoid or lessen the cost of associated damages and improve the resilience of the countries. Efficient adaptation programmes are seen as a damage control measure. For example, we have estimated that, in Greece, adaption can reduce the cost of climate change impact by almost 30%.[21]


Recognizing the importance of adaptation, the BoG signed an MOU with the Hellenic Ministry of Environment and Energy and the Academy of Athens, and in 2015 we drafted the National Climate Change Adaptation Strategy. This strategy sets out objectives, guiding principles and implementation tools for a growth-oriented adaptation strategy, in line with European directives and international best-practices. Furthermore, the BoG is currently working on the 8-year Life IP AdaptInGr programme that aims at advancing and promoting adaptation action in Greece, establishes monitoring mechanisms and strengthens the resilience of the Greek society through awareness and dissemination actions.




Can you describe the multilateral dimensions of this problem; obviously, Greece belongs to the Eurozone and the European Central Bank is a focal point for these conversations; we’ve also seen the Bank of England take a leadership role, the U.S. Federal Reserve and the Commodity Futures Trading Commission are grappling with this topic too; the IMF devoted a chapter in its WEO on climate change; what is the status of these conversations and how might we accelerate cross-border collaboration? Are you concerned that Euro Area prioritization of climate in a world where other large economies don't follow suit could make European economies less competitive while not actually solving the global climate crisis?




Indeed, climate change has sprung to the top of the public agenda. The World Economic Forum lists extreme weather and climate change policy failures as the gravest threats for several years in a row. Moreover, this growing attention is echoed by international actors like the World Bank and the IMF.


There are of course, as you mentioned, multilateral dimensions to climate change. Traditional environmental problems are being dealt with locally.[22] Yet, in the case of climate change, the “mother of all externalities”, [23] the problem is a public good one[24] and solutions need to be universal. This provides motivation for collective global action, and yet, as no independent action will solve the issue, there are free-riding incentives and difficulties with the compliance to international climate agreements, as has been demonstrated by the Trump administration’s decision to leave the Paris Agreement.

On the other hand, we heard recently President von der Leyen announce new, more ambitious goals on EU greenhouse gas emissions. This level of ambition has already put the EU on a pathway to reaching climate neutrality by 2050 and underlines a continued global climate leadership role. This strong political signalling will also attract private sector investments that are key to the success of the energy transition, along with financing instruments that will be instrumental in leveraging private sector engagement. And I also trust that the EU’s commitment will also inspire many to raise their own ambition.

Therefore I see the EU’s prioritization of climate as an opportunity for Europe to be a leader on the global stage and get the first mover advantage by giving also the European industry a global competitive advantage. EU companies can be at the forefront of innovation, be key technology and material suppliers and service providers. Innovations picked and developed by the European industry can be implemented in many sectors worldwide, like renewable energy, buildings, transport, industry and agriculture.

I cannot of course overstate the importance of joint action, both at national and international level. For example, at the BoG, we have a broad network of collaborations on climate issues and are also working in close cooperation with the Hellenic Ministry of Environment and Energy. Likewise, on the global stage, there are important and ambitious initiatives that the BoG is participating at, such as the NGFS and the UNEP FI. The Bank of Greece is the 1st central bank worldwide to endorse the UNEP FI Responsible Banking Principles.[25]


It is clear that we need collective action by governments, firms, investors, households and central banks, to accelerate the transition towards a carbon-neutral economy and a strong framework to address the climate challenge. To maintain the temperature at the target of +1.5 degrees Celsius by 2100 requires unprecedented mobilization, action and cooperation of all. Partnership for the Goals is, after all, the 17th, last and perhaps most fundamental, goal of the United Nations for sustainable development.


[1] Under an inaction (“business as usual”) scenario, the Greek GDP could, ceteris paribus, fall by 2% annually by 2050 and even further by 2100, while the total cost to the Greek economy could reach a cumulative €701 billion by 2100, CCISC (2011), The environmental, economic and social impacts of climate change in Greece, Bank of Greece, pp. 453-457,

[2] Τhe vulnerability analysis is included in CCISC (2015), National Climate Change Adaptation Strategy (NCCAS),

[3] Statements by the Governor of the Bank of Greece on the occasion of the World Environment Day on June 5th 2019 and June 5th 2020

[4] OMFIF Special Report: Central banks and climate change,

[5] OMFIF tweet following the Special Report: Central banks and climate change

[6] Le Quéré et al, “Temporary reduction in daily global CO2 emissions during the COVID-19 forced confinement”, Nature Climate Change, May 2020 accessed at

[7] The newly adopted Greek National Energy and Climate Plan (NECP) sets ambitious targets – much more ambitious than the core EU objectives – on issues like greenhouse gas (GHG) emissions, energy efficiency, renewable energy sources and lignite phase-out for power generation, equally creating opportunities for new lines of growth stemming from the transformation of core sectors of the economy, such as energy production and use.


[9] Interview with Christine Lagarde, conducted by Dominique Lecoq and Marc Aubault on 29 July and published on 31 July,

[10] Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at a virtual roundtable on “Sustainable Crisis Responses in Europe” organised by the INSPIRE research network, 17 July 2020

[11] Ibid. “We are currently holding around 20% of the eligible green corporate bond universe. But the green universe only comprises a small fraction of the overall universe. As this market segment grows and develops, the Eurosystem will automatically purchase more green bonds.”

[12] For example, we could link the eligibility of securities for purchase programmes and as collateral in refinancing operations to the disclosure regime of the issuing firms. Then the Eurosystem would only accept collateral if it is able to fully assess climate-related risks. This and other questions are being addressed in the monetary policy strategy review.

[13] Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at a virtual roundtable on “Sustainable Crisis Responses in Europe” organised by the INSPIRE research network, 17 July 2020

[14] Keynote speech by Andrea Enria, Chair of the Supervisory Board of the ECB, at the European Central Bank Climate and Environmental Risks Webinar, Frankfurt am Main, 17 June 2020,

[15] Tol, R.S.J. (2009), The Economic Effects of Climate Change, in Journal of Economic Perspectives, Vol. 23, No 2, Spring 2009, pp. 29-51,

[16] The tragedy of the commons is a situation in a shared-resource system where individual users, acting independently according to their own self-interest, behave contrary to the common good of all users by depleting or spoiling the shared resource through their collective action. The concept originated in an essay written in 1833 by the British economist William Forster Lloyd, who used a hypothetical example of the effects of unregulated grazing on common land (also known as a "common") in Great Britain and Ireland. In a modern economic context, "commons" is taken to mean any shared and unregulated resource such as the atmosphere, oceans, rivers, ocean fish stocks, or even an office refrigerator.

[17] Keynote speech by Andrea Enria, Chair of the Supervisory Board of the ECB, at the European Central Bank Climate and Environmental Risks Webinar, Frankfurt am Main, 17 June 2020,

[18] Finding the Right Policy Mix to Safeguard our Climate, IMF Blog and Chapter 3 of the World Economic Outlook, “Mitigating Climate Change – Growth and Distribution-Friendly Strategies,” by Philip Barrett, Christian Bogmans, Benjamin Carton, Oya Celasun, Johannes Eugster, Florence Jaumotte, Adil Mohommad, Evgenia Pugacheva, Marina M. Tavares, and Simon Voigts,

[19] For Greece climate change appears to be a major threat, as the impact on almost all sectors of the national economy is expected to be adverse. Under an inaction (“business as usual”) scenario, the Greek GDP could, ceteris paribus, fall by 2% annually by 2050 and even further by 2100, while the total cost to the Greek economy could reach a cumulative €701 billion by 2100 (GDP contraction relative to base year GDP at constant 2008 prices), as estimated in CCISC (2011), The environmental, economic and social impacts of climate change in Greece, Bank of Greece, pp. 453-457, available at:

[20] As mentioned on the “Adaptation to Climate Change Blueprint for a new, more ambitious EU strategy”, EU Commission 2020,

[21] CCISC (2011), The environmental, economic and social impacts of climate change in Greece, Bank of Greece, pp. 453-457, available at:

[22] For example, the air pollution in a Chinese city has no direct impact on a European city.

[23] Tol, R.S.J. (2009), The Economic Effects of Climate Change, in Journal of Economic Perspectives, Vol. 23, No 2, Spring 2009, pp. 29-51,

[24] IPCC (2001) Third Assessment Report: Climate Change, Working Group III: Mitigation,

[25] The Responsible Banking Principles of the United Nations Environment Programme Finance Initiative




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