ECB Commits to Incorporating Nature Degradation Alongside Climate Change in Its Monetary Policy Framework
SDG 13: Climate Action
SDG 15: Life on Land
Institutions: Reserve Bank of India; Ministry of Environment, Forest and Climate Change
Frank Elderson of the ECB reaffirmed that the bankβs monetary policy strategy, centered on a symmetric 2 percent inflation target and anchored in its price stability mandate, remains fundamentally unchanged following a recent assessment.
However, the speech marked a pivotal enhancement: the strategy now formally incorporates βnature degradationβ alongside climate change, acknowledging ecosystems - such as fertile soil, pollination, clean water, and biodiversity - as economically significant yet vulnerable assets. This addition underlines the imperative to integrate nature-related considerations when deliberating monetary and supervisory policies, though the ECB clarified it is not a policymaker in environmental domains but must adapt policies in light of environmental realities.
Elderson highlighted that safeguarding nature is aligned with evidence-based policy and reflects an understanding that ecosystem deterioration can erode economic inputs necessary for long-term price and financial stability. Looking ahead, the bank plans further exploration into how nature-related risks impact economic, financial, and monetary outcomes.
Relevant question for policy stakeholders: How can Indiaβs central banking framework adapt by integrating nature degradation into monetary policy analysis - balancing ecosystem risks and economic mandates to support inflation control and long-term financial resilience?
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https://www.ecb.europa.eu//press/key/date/2025/html/ecb.sp250704~167d74e3c3.en.html