The Conversation, January 2024
Climate finance was a major focus at the recent COP28 summit, but one set of game-changing institutions remains largely missing in such conversations: central banks. Central banks are public institutions, charged with maintaining economic stability through controlling the supply of money in an economy. These banks have enormous power to catalyse a more just, equitable and climate-stable future. However, our recent research points out that their policies have been slowing down – rather than speeding up – transformative climate action. The problem is these banks focus on financial stability in the near term, which means propping up a status quo which promotes further climate instability. And that means they are making things more unstable in the long term.
Our research suggests that long-term stability cannot be achieved without first disrupting and transforming the existing financial system. One way to do this would be for central banks to use tools already available to them to trigger a short-term intentional disruption in order to redirect financial flows and create greater stability in the long-term – we call this “creative disruption”.
