How central banks address climate and transition risks

The policy problem

Decarbonization and climate change entail risks for the global economy. Fossil fuel investments face stranded asset risks, that is, lost profits due to early retirement, as the global economy decarbonizes. Stranded asset risks threaten financial stability. Similarly, exposure to climate hazards contributes to financial instability. Clean energy investments, meanwhile, come with technology and market risks that—left unmitigated—result in lower climate mitigation. Over the last decade, central banks have taken on a role in examining and managing transition and physical climate risks. Yet the response from central banks has not been uniform: some have adopted measures of varying type and stringency; others have not taken any actions.

The findings

We find limited evidence that economic risks related to climate and energy are associated with central bank behaviour. While physical risks are associated with central bank actions to some extent, stranded asset risks and clean energy investment risks are not. Instead, central bank actions to manage risks are significantly and positively associated with domestic climate politics, including climate policy stringency and public concern with climate change. Our results thus suggest a risk mitigation gap between the magnitude of transition risks and central bank actions, and that central banks may not be entirely autonomous risk managers but responsive to political demands, reinforcing, instead of correcting for, lagging decarbonization policy. Our analysis is exploratory. Future research needs to move beyond cross-sectional to time series analysis, investigate the underlying mechanisms, and study the broader regulatory system for climate risk, including financial supervisors and private sector institutions.

The study

We provide a comprehensive, systematic study of central bank management of climate risks. We introduce an original dataset on climate risk management actions by central banks across 47 OECD and G20 countries and develop a classification system to identify actions that re-risk brown investments and de-risk green investments (Fig. 1). Re-risking refers to embedding transition risks and physical climate risks into financial risk management practices to ensure financial stability, whereas de-risking means reducing the risk of clean energy investments, that is, the technology, market, and policy risks of new clean energy technologies, to facilitate decarbonization. We use a simple linear regression model to test whether re-risking and de-risking scores are associated with economic risk factors (the size of the oil and gas sector and the financial sector as well as exposure to climate hazards) or political factors (climate policy stringency and public concern with climate change).

Fig. 1: Re-risking and de-risking scores by country.
figure 1

This graph plots each country’s calculated re-risking and de-risking scores. Re-risking refers to central bank actions that manage stranded asset risks and physical climate risks, while de-risking refers to actions targeting clean energy investment risks. Scores higher than 10 indicate that the country engages in substantial activity in that policy group, while scores 10 or lower indicate marginal efforts. The two-digit ISO country codes indicate country names. There is substantial variation in the extent to which countries re-risk and de-risk. The blue quadrant shows countries with high re-risking and de-risking scores. These are mostly member states of the European Central Bank, the UK, and China. The red quadrant includes countries with relatively less activity in both re-risking and de-risking scores, such as the United States, South Korea, Costa Rica, South Africa, and Russia. Countries in the yellow quadrant engage in more re-risking than de-risking (Brazil, Switzerland, Sweden). Last, countries in the green quadrant engage primarily in de-risking (Hungary, Denmark, Japan, India, Indonesia). Figure adapted from Shears, E. et al. Nat. Energy https://doi.org/10.1038/s41560-025-01724-w (2025); Springer Nature Ltd.

Full size image

Related Articles

The risk effects of corporate digitalization: exacerbate or mitigate?

This study elaborates on the risk effects of corporate digital transformation (CDT). Using the ratio of added value of digital assets to total intangible assets as a measure of CDT, this study overall reveals an inverse relationship between CDT and revenue volatility, even after employing a range of technical techniques to address potential endogeneity. Heterogeneity analysis highlights that the firms with small size, high capital intensity, and high agency costs benefit more from CDT. It also reveals that advancing information infrastructure, intellectual property protection, and digital taxation enhances the effectiveness of CDT. Mechanism analysis uncovers that CDT not only enhances financial advantages such as bolstering core business and mitigating non-business risks but also fosters non-financial advantages like improving corporate governance and ESG performance. Further inquiries into the side effects of CDT and the dynamics of revenue volatility indicate that CDT might compromise cash flow availability. Excessive digital investments exacerbate operating risks. Importantly, the reduction in operating risk associated with CDT does not sacrifice the potential for enhanced company performance; rather, it appears to augment the value of real options.

Type 2 immunity in allergic diseases

Significant advancements have been made in understanding the cellular and molecular mechanisms of type 2 immunity in allergic diseases such as asthma, allergic rhinitis, chronic rhinosinusitis, eosinophilic esophagitis (EoE), food and drug allergies, and atopic dermatitis (AD). Type 2 immunity has evolved to protect against parasitic diseases and toxins, plays a role in the expulsion of parasites and larvae from inner tissues to the lumen and outside the body, maintains microbe-rich skin and mucosal epithelial barriers and counterbalances the type 1 immune response and its destructive effects. During the development of a type 2 immune response, an innate immune response initiates starting from epithelial cells and innate lymphoid cells (ILCs), including dendritic cells and macrophages, and translates to adaptive T and B-cell immunity, particularly IgE antibody production. Eosinophils, mast cells and basophils have effects on effector functions. Cytokines from ILC2s and CD4+ helper type 2 (Th2) cells, CD8 + T cells, and NK-T cells, along with myeloid cells, including IL-4, IL-5, IL-9, and IL-13, initiate and sustain allergic inflammation via T cell cells, eosinophils, and ILC2s; promote IgE class switching; and open the epithelial barrier. Epithelial cell activation, alarmin release and barrier dysfunction are key in the development of not only allergic diseases but also many other systemic diseases. Recent biologics targeting the pathways and effector functions of IL4/IL13, IL-5, and IgE have shown promising results for almost all ages, although some patients with severe allergic diseases do not respond to these therapies, highlighting the unmet need for a more detailed and personalized approach.

Iron homeostasis and ferroptosis in muscle diseases and disorders: mechanisms and therapeutic prospects

The muscular system plays a critical role in the human body by governing skeletal movement, cardiovascular function, and the activities of digestive organs. Additionally, muscle tissues serve an endocrine function by secreting myogenic cytokines, thereby regulating metabolism throughout the entire body. Maintaining muscle function requires iron homeostasis. Recent studies suggest that disruptions in iron metabolism and ferroptosis, a form of iron-dependent cell death, are essential contributors to the progression of a wide range of muscle diseases and disorders, including sarcopenia, cardiomyopathy, and amyotrophic lateral sclerosis. Thus, a comprehensive overview of the mechanisms regulating iron metabolism and ferroptosis in these conditions is crucial for identifying potential therapeutic targets and developing new strategies for disease treatment and/or prevention. This review aims to summarize recent advances in understanding the molecular mechanisms underlying ferroptosis in the context of muscle injury, as well as associated muscle diseases and disorders. Moreover, we discuss potential targets within the ferroptosis pathway and possible strategies for managing muscle disorders. Finally, we shed new light on current limitations and future prospects for therapeutic interventions targeting ferroptosis.

Targeting of TAMs: can we be more clever than cancer cells?

With increasing incidence and geography, cancer is one of the leading causes of death, reduced quality of life and disability worldwide. Principal progress in the development of new anticancer therapies, in improving the efficiency of immunotherapeutic tools, and in the personification of conventional therapies needs to consider cancer-specific and patient-specific programming of innate immunity. Intratumoral TAMs and their precursors, resident macrophages and monocytes, are principal regulators of tumor progression and therapy resistance. Our review summarizes the accumulated evidence for the subpopulations of TAMs and their increasing number of biomarkers, indicating their predictive value for the clinical parameters of carcinogenesis and therapy resistance, with a focus on solid cancers of non-infectious etiology. We present the state-of-the-art knowledge about the tumor-supporting functions of TAMs at all stages of tumor progression and highlight biomarkers, recently identified by single-cell and spatial analytical methods, that discriminate between tumor-promoting and tumor-inhibiting TAMs, where both subtypes express a combination of prototype M1 and M2 genes. Our review focuses on novel mechanisms involved in the crosstalk among epigenetic, signaling, transcriptional and metabolic pathways in TAMs. Particular attention has been given to the recently identified link between cancer cell metabolism and the epigenetic programming of TAMs by histone lactylation, which can be responsible for the unlimited protumoral programming of TAMs. Finally, we explain how TAMs interfere with currently used anticancer therapeutics and summarize the most advanced data from clinical trials, which we divide into four categories: inhibition of TAM survival and differentiation, inhibition of monocyte/TAM recruitment into tumors, functional reprogramming of TAMs, and genetic enhancement of macrophages.

Integrated proteogenomic characterization of ampullary adenocarcinoma

Ampullary adenocarcinoma (AMPAC) is a rare and heterogeneous malignancy. Here we performed a comprehensive proteogenomic analysis of 198 samples from Chinese AMPAC patients and duodenum patients. Genomic data illustrate that 4q loss causes fatty acid accumulation and cell proliferation. Proteomic analysis has revealed three distinct clusters (C-FAM, C-AD, C-CC), among which the most aggressive cluster, C-AD, is associated with the poorest prognosis and is characterized by focal adhesion. Immune clustering identifies three immune clusters and reveals that immune cluster M1 (macrophage infiltration cluster) and M3 (DC cell infiltration cluster), which exhibit a higher immune score compared to cluster M2 (CD4+ T-cell infiltration cluster), are associated with a poor prognosis due to the potential secretion of IL-6 by tumor cells and its consequential influence. This study provides a comprehensive proteogenomic analysis for seeking for better understanding and potential treatment of AMPAC.

Responses

Your email address will not be published. Required fields are marked *