Climate change is one of the major global challenges of modern times. It also poses a significant threat to price stability—the major objective of modern central banks. It creates the risk of stagflation, as it can lead to price increases (due to the increased frequency of extreme weather events, which will impact food production) and simultaneously weaken economic activity (due to lower productivity resulting from temperature changes). Climate change and political pressure have sparked a lively scientific debate on whether and how central banks should adapt their monetary policy frameworks to support efforts to stop climate change. Although the literature analyzes actions undertaken by monetary authorities in the areas of sustainable finance and climate risk analysis, this research still needs to be developed and disseminated. Therefore, the main aim of this article is to theoretically analyze the integration of climate issues with the monetary policy of modern central banks. This article provides a theoretical and integrative analysis of the role of modern central banks in addressing climate change, with a particular focus on implications for monetary policy. The study is based on a structured critical literature review and desk research, employing a transparent, multi-stage selection and analysis process, based on the PRISMA approach. The article contributes to the existing literature by offering a systematic synthesis of the main approaches to integrating climate-related considerations into central banking. The analysis organizes the literature into distinct analytical strands, including institutional and coordination-based initiatives, theoretical justifications for central bank involvement, debates on mandates and independence and the development of green monetary policy instruments. The findings suggest that the integration of climate considerations into monetary policy is feasible primarily within a risk-based and prudential framework, while more interventionist approaches may generate tensions with the primary objective of price stability. At the same time, the literature reveals persistent trade-offs between market neutrality and active policy intervention, as well as between institutional constraints and policy effectiveness. The study highlights that climate-related measures are often implemented through macroprudential, supervisory and financial stability functions, which complement rather than substitute monetary policy in the strictest sense. The article contributes to a more coherent understanding of the evolving role of central banks in the context of climate change by synthesizing a fragmented body of research and identifying key conceptual tensions that remain unresolved.
Aleksandra Nocoń (Mon,) studied this question.