Mind the gap: Monetary policy and financial regulations for supporting green finance

Since the Paris agreement, the debate among researchers and practitioners on the solid role of central banks and financial regulators in supporting a smooth transition from a high to low carbon economy has been levitating. Few monetary authorities took a step to incorporate the policies mitigating the climate-related financial risks to their operational radar, creating a rather heterogeneous picture of climate action. This chapter sheds light on the current state-of-the-art debate on the involvement of central banks and financial regulators in green debate and their contribution in aligning the finance sector with sustainable transition roadmaps. We conduct our analyses through the lenses of different governance setups of money and financial regulatory authorities, finding that policy inaction is mainly connected to the conflict the integration of climate-related policy could bring to operational mandates. We highlight that the conflict can be less pronounced in a specific policy arrangement than the others respecting Tinbergen's principle.