%0 Journal Article %A Ramu Thiagarajan %A Richard F. Lacaille %A Simona Mocuta %A Hanbin Im %T Macro Implications of Climate Risks %D 2022 %R 10.3905/jesg.2022.1.060 %J The Journal of Impact and ESG Investing %P jesg.2022.1.060 %X Climate risks and rational policies to help manage the transition to net zero are among the most important topics today for central banks, sovereign governments, regulatory bodies, and the macroeconomy at large. There has been an active debate across the globe about the need, scope, scale, and depth of policies to facilitate a smooth journey to net zero by 2050. In this article, the authors examine the different channels by which climate risks can impact the economy and discuss the role of central banks in fighting climate change. Climate risks induce supply and demand shocks, which can have a material impact on inflation and growth. The authors concur with the concern of the European Central Bank that the transition could be inflationary in the near term. Although important, they believe that the role of central banks is likely to be somewhat limited in the battle against climate change; the pathways to effect change through central bank policy are indirect and dependent on transmission through other channels that weaken efficacy. Nevertheless, the authors conclude that incorporating appropriate climate risk tests into the regulatory framework fall within the central banks’ mandate of ensuring financial stability. %U https://jesg.pm-research.com/content/pmrjesg/early/2022/09/22/jesg.2022.1.060.full.pdf