Macrofinancial impact of climate change and environmental degradation (2022-24)

Climate change and environmental degradation are increasingly becoming macro-relevant developments. Physical and transition risks from climate change can cause large losses to the financial sector. Weather events such as droughts, floods and hurricanes, as well as wildfires, can seriously impact populations and the productive capacity of economies, with a first-order impact on growth and inflation. The loss of biodiversity, natural assets and ecosystem services can undermine the basis for economies to function. Yet these issues are still poorly understood both in economics research and in the work of many central banks. While there is strong recognition of the importance of the issues, central bank research has been struggling to keep pace with external developments.

In December 2022, the Consultative Council for the Americas (CCA) launched its sixth Research Network, covering the macro-financial implications of climate change and environmental degradation. The Network had two main goals: 1) to help central banks create a medium-term agenda of high-quality research on the impact of climate and environmental issues on the economies of the Americas; and 2) to build up technical capacity in central banks so they can better study these issues going forward.

The Network consisted of senior researchers at central banks from countries throughout the Americas, ie from the BIS Consultative Council for the Americas (CCA) – Argentina, Brazil, Canada, Chile, Colombia, Mexico, Peru, the United States (both the Federal Reserve Bank of New York and the Federal Reserve Board) – and additional central banks from The Bahamas, Costa Rica, the Eastern Caribbean Currency Union and Uruguay. It convened regular virtual meetings and webinars where members can present early-stage work or external presenters can help participants build their knowledge on specific climate and environmental issues.

The network was chaired by Elías Albagli of the Central Bank of Chile. Tamma Carleton (UC Santa Barbara), Eric Strobl (University of Bern) and Roberto Schaeffer (Federal University of Rio de Janeiro) served as the academic advisers for the network. The work of the network concluded in December 2024 with a special edition of the CCA annual Research Conference.