The European Central Bank can price climate risk better than market participants and should make its own environmental analysis when conducting monetary policy, ECB board member Fabio Panetta said on Monday.
Panetta said the ECB should take the consequences of climate change into account in its economic analysis and policy implementation, for example when it values the collateral that banks post in return for its loans.
"The ECB has to protect its balance sheet from the financial risks caused by climate change that are not correctly priced by the markets," Panetta said.
"By performing its own analysis of these risks on the basis of rigorous methodologies, the ECB can contribute to the accurate valuation of these climate-related risks."
(Reporting By Francesco Canepa; Editing by Toby Chopra)
