Talking the talk vs. walking the walk: greening of central banks’ speeches and policies

Abstract

The enormity of risks posed by climate change to financial stability have led many central banks to consider including its impacts to varying degrees in their operations and policymaking. Although the implementation of these policies is at a nascent stage, there is a vibrant discourse surrounding central banks’ appropriate role in undertaking climate-related policies. In this context, this paper aims to develop a ‘green index’ which quantifies the frequency of occurrences of climate change and green finance-related words in a dataset of all central bankers’ speeches from 2000 to 2021. It further explores whether central banks that are more active in delivering speeches on climate-related issues are also more likely to implement financial and regulatory policies aimed at mitigating climate-related risks to financial stability. Focusing only on early implementers of green financial and regulatory policies and examining the timing of green speeches vs policy implementation, I find speeches and policies to be highly correlated; although most central banks’ speeches on climate risks come after they have implemented these policies. These results are somewhat consistent with previous studies in this area which have found that central banks walking the walk on climate policies are different from those talking the talk.