This area of work examines the role of central banks and financial supervisors in greening the financial system. Our projects aim to strengthen the evidence base, to provide a technical and policy-oriented foundation to support the understanding of the implications of environmental challenges for central banks and financial supervisors through academic research, policy analysis and dialogue with practitioners.

The context to this work is the increasing recognition that environmental challenges such as climate change and biodiversity loss have a material impact on economies, with potentially significant ramifications for macroeconomic, price and financial stability. There is now wide acknowledgement among central bankers and financial supervisors that addressing sustainability challenges falls within their mandate, and a growing number of monetary and prudential authorities have started to integrate sustainability and environmental risk considerations into their policy and operational frameworks. Over 100 central banks and financial supervisors are now members of the Network for Greening the Financial System (NGFS), for example.

The bulk of the world’s financial regulation, however, has been designed and implemented without explicit consideration of climate change and sustainable development. The Grantham Research Institute is contributing to the extensive work that is still needed, to translate the growing acknowledgement of the links between sustainability factors and financial regulation into actual changes in the conduct of central banking and supervision. Our work focuses on several large themes and projects, described below.

Grantham Research Institute work programmes

Net-zero central banking

This work programme investigates the role that central banks and financial supervisors could play in supporting the transition to net-zero. It investigates a two-fold rationale: first, achieving a net-zero economy is the best way to minimise the risks of climate change to the stability of the financial system and the macroeconomy; and second, central banks and supervisors need to ensure that their activities are coherent with net-zero government policy. This work programme addresses the international context but with the UK, EU and emerging markets as specific focus areas.

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Net-zero supervision

This work programme investigates the implications for financial supervisors of the EU’s objective of achieving climate-neutrality by 2050. It explores the prudential challenges of the net-zero transition and the role of supervisors in addressing them. In this context, it also focuses on the role that prudential supervisors could have in the coming era of transition plans.

Relevant publications

INSPIRE – the International Network of Sustainable Financial Policy Insights, Research and Exchange

INSPIRE is a global research network and designated research stakeholder of the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). The INSPIRE secretariat is co-hosted by the Grantham Research Institute with the ClimateWorks Foundation, which also provides philanthropic support. INSPIRE is currently producing a Sustainable Central Banking Toolbox. Its previous work includes a Crisis Response Toolbox and the major NGFS-INSPIRE Study Group on Biodiversity and Financial Stability.

INSPIRE Sustainable Central Banking Toolbox Policy Briefing Paper Series: Co-hosted with the SOAS Centre for Sustainable Finance, and published by the Grantham Research Institute, this briefing paper series is designed to support central bankers and financial supervisors in calibrating monetary, prudential and other instruments in accordance with sustainability goals, as they address the ramifications of climate change and other environmental challenges. All papers in this series are being written and peer-reviewed by leading experts from academia, think tanks and central banks and are based on cutting-edge research, drawing from best practice in central banking and supervision.
Papers from the Central Banking Toolkit Policy Briefing Series can be downloaded here.

INSPIRE Crisis Response toolbox: At the onset of the COVID-19 crisis, INSPIRE developed a Toolbox of Sustainable Crisis Response Measures to support central banks and financial supervisors in designing crisis responses that are aligned with climate- and sustainability goals. Two editions of the Toolbox were published in 2020. As economies have moved from crisis response into recovery, INSPIRE-supported research has investigated how monetary and financial policy tools can be calibrated in ways that account for climate- and sustainability-related goals and avoid the build-up of associated risks in the financial system.
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Relevant publications

NGFS-INSPIRE Study Group on Biodiversity and Financial Stability: Hosted by the Grantham Research Institute on behalf of INSPIRE, the study group was established in April 2021 to develop a research-based approach to how central banks and supervisory authorities can fulfil their mandates in the context of biodiversity loss. It is co-chaired by Dr MA Jun (Special Advisor to the Governor of the People’s Bank of China and Chair of the NGFS Workstream on Research) and Professor in Practice Nick Robins (London School of Economics and INSPIRE). As of April 2022, the study group comprised 103 individuals from 25 NGFS members and observers and 28 academic and professional institutions.
Find out more at:

Relevant publications

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