Monetary policy has significant environmental and social repercussions. The channels through which money in our economies is created, as well as the actions taken by central banks with regard to interest rate levels, asset purchases and macroprudential policy are key factors driving economic decisions. Yet, in particular since the 1990s, there has been a broad consensus that central banks should focus on one overriding policy goal: consumer price stability.

As a result, little analysis or public profile was given to other impacts of monetary policy, including on environmental and social sustainability. In view of the central role monetary policy plays in financial systems and in setting the overall context for financial flows this is striking  – even more so as the financial crisis has significantly expanded the interventions by central banks and the toolbox they make use of. The US Fed more than quadrupled its balance sheet from below 1 trillion US$ in 2008 to 4.5 trillion US$ at the end of August 2014. The European Central Bank (ECB), the Bank of England, the Bank of Japan, the People’s Bank of China as well as further central banks pursued similar strategies of monetary easing. The 80 billion Euro that the ECB is currently injecting into financial markets on a monthly basis is a case in point.

The expanding role of central banks and their move into unconventional territory has not only increased their influence, but also triggered a debate to review the objectives they pursue, as well as the instruments they use. Against this background, this webinar explores the links between monetary policy and environmental sustainability as well as the potential role central banks can play in supporting the transition to a low-carbon economy.