đź•’ Last updated on August 11, 2025
For decades, central banks focused mainly on keeping prices stable and making sure the financial system ran smoothly.
A shift in central bank conversations
They rarely spoke about topics like climate change. But in recent years, their speeches have started to include words like “green finance,” “carbon risks,” and “decarbonization.”
This change did not happen overnight. A large study of more than 35,000 speeches from 131 central banks between 1986 and 2023 shows that climate issues have been appearing in central bank talks for longer than most people think. In fact, some central banks in Asia were speaking about climate risks years before it became common in Europe or North America.
For example, in the early 2000s, the central bank in Hong Kong was already warning about financial risks linked to climate change. A few years later, in 2008, the central bank in New Zealand spoke about how carbon pricing could affect inflation. Others, like the central bank of Bangladesh, were openly talking about the physical damage caused by climate events as early as 2012.
These early mentions show that climate awareness in central banking began well before it became a global trend. The rise in such speeches has now turned into a major shift in how central banks communicate with the public.
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Two main ways central banks talk about climate
When central banks speak about climate, their words usually fall into two broad types of stories, or “narratives.”
The first narrative is called “green finance.” This is when central banks focus on the opportunities that come from moving towards cleaner energy and reducing pollution. They talk about how banks and investors can fund eco-friendly projects, develop new technologies, and help economies shift to low-carbon activities. In short, this narrative is about promoting growth in green sectors.
The second story concerns “risks associated with climate change.” Here, the risks that climate change presents to the financial system are highlighted. Central banks warn about threats from extreme weather events like floods or storms, as well as risks that come from changing rules, shifting technologies, or sudden drops in the value of polluting industries.
Both narratives have grown in importance, but the balance between them varies by country. Many Western central banks, like those in Europe and North America, mainly talk about risks. Meanwhile, several Asian central banks, including those in Singapore and China, highlight green finance and the positive side of the transition.
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This difference reflects the way central banks see their role. Some believe they should encourage investment in cleaner activities, while others think their main job is to remain neutral and simply warn about possible dangers.
Why these speeches matter to investors
It might seem like speeches are just words, but in financial markets, words from central banks can move billions of dollars. Investors listen closely because these speeches can give hints about future policies, regulations, or risks that might affect their money.
Researchers found that when central banks talk more about climate, it can have a real impact on stock prices. The effect is most visible in what are called “green” companies—businesses that score high on environmental performance—and “dirty” companies, which score low.
Here’s what the data shows:
- On days when the US central bank (the Federal Reserve) focuses more on climate in its speeches, green companies’ stocks tend to go up compared to dirty companies.
- Speeches that emphasize climate-related threats over green finance prospects have the greatest impact.
- The market reaction is bigger when comparing the cleanest companies to the most polluting ones.
To check if this trend is the same in other parts of the world, the study also looked at 41 countries. The results were similar: when a country’s central bank spoke more about climate, companies in that country with better environmental scores performed better on the stock market than their lower-scoring peers.
The numbers are significant. A company with an environmental score well below average could see its stock perform more than 1% worse than a high-scoring company when climate issues are in focus. That might sound small, but in financial markets, even half a percent can mean millions of dollars.
Interestingly, the study found little evidence that these effects spill over across borders. In other words, if a central bank in one country talks about climate, the stock market in another country is not strongly affected. Investors seem to pay more attention to what their own central bank says than to speeches from abroad.
Another finding is that institutional factors matter more than actual climate exposure. This means that it is not necessarily countries most at risk from climate disasters that talk about it the most. Instead, central banks that have wider powers, stronger financial supervision roles, or are members of climate-focused networks are more likely to include climate in their communication.
This shows that the decision to talk about climate is shaped more by how a central bank is organized and who it works with than by how vulnerable the country is to climate change itself.