International Banking ♦ Article 63 Va. J. Int’l L. 397 (2023)

Sustainable Central Banking

ROSA MARÍA LASTRA & CHRISTINA PARAJON SKINNER

In the past several years, central banks globally have begun to consider whether, and to what extent, questions of climate change and sustainability intersect with their statutory mandates. The issues are not straightforward nor is there a one-size-fits-all approach. A range of important questions thus remain unanswered. To what extent can central banks pursue climate change and sustainability goals within their legislative authorities and thus retain legal legitimacy around these actions? Where legal authority exists, how can central banks operationalize climate or sustainability goals—are existing tools fit for purpose or are new ones required? What is the best distribution of tasks between political authorities and depoliticized agencies with narrower mandates? Inasmuch as public discourse and debate have thrown up these thorny questions, the next several years will require policy and academic conversation to explore them. To that end, this Article develops a set of principles for central banks to consider when addressing these climate policy governance questions, in particular with regard to the limits and legitimacy of sustainable central banking. It does so by examining the legal frameworks governing, and unfolding climate initiatives in, the U.S. Federal Reserve, the U.K. Bank of England, and the European Central Bank.