James Talbot, Bank of England, on Climate Shocks and Monetary Policy

I'm Jason Mitchell, CIO for Responsible Investment, Sandman Group.

You're listening to A Sustainable Future, a podcast about what we're doing today to build a more sustainable world tomorrow.

Hi, everyone.

Welcome back to the podcast.

And I hope everyone is staying well.

So if you've listened to enough of these episodes, you know that many of these conversations revolve around a single idea.

It could be a book, an academic paper, speech, or a new report.

But it is invariably about something that changes or at least informs how we think about sustainable investing.

This episode is definitely one of those.

Let me explain.

I recently came across a recent speech titled Measure Model Tackle Taylor, the Bank of England's approach to assessing and managing climate impacts across its core objectives.

Now, I've long been interested in how central banks are approaching climate change, but this speech really resonated with me.

In other words, this was one of the clearest and most substantive articulations I've seen of what it actually means to embed climate risk into the core operating framework of a central bank, as opposed to, let's say, treating it as a separate parallel agenda.

At the same time, we should recognize that central banks face a real dilemma.

Climate risk is becoming increasingly material to their core mandates.

Think price stability, financial stability, and prudential supervision.

Yet, the policies that determine the climate outcomes largely sit outside their remit.

So while central banks can't ignore climate risk, they also can't necessarily be seen as making climate policy.

That's the balance they have to strike.

Call it the swim lane paradox, which we talk about.

Now, that tension between doing too little and overreaching is why it's great to have James Talbot from the Bank of England on the podcast.

We talk about why climate risk has shifted from a long-run abstraction into something that feeds directly into inflation, asset prices, and insurance coverage.

How the Bank of England is responding across its monetary policy, prudential regulation, and financial stability functions.

and what it will take to keep the financial system stable and prices stable as climate shocks become more frequent and the transition accelerates.

James is Executive Director of the International Directorate at the Bank of England.

He's responsible for the bank's international analysis and risk assessment and sets the bank's international strategy, including policy development in the G20, G7, BIS, FSB, and IMF.

He also serves as the bank's executive sponsor for climate and chairs the Network for Greening the Financial System, or NGFS, work stream on monetary policy.

His earlier roles at the bank include heading monetary assessment and strategy and advising on macroprudential policy and representing the UK on the executive board of the IMF.

Welcome to the podcast, James Talbot.

It's great to be here recording this at the Bank of England, and thank you for taking the time today.