Integrating Climate Risks into Central Banks’ Monetary Policy Framework: A Systematic Literature Review

Central banks increasingly recognise climate risks as a threat to financial stability, yet integrating these risks into monetary policy remains complex. This systematic literature review examines how central banks address climate risks, focusing on policy tools, institutional constraints, and empirical evidence. Following PRISMA guidelines, the study reviews peer-reviewed publications, policy reports, and institutional studies from 2010 to 2025. Findings reveal that central banks employ various monetary policy tools, including green quantitative easing, differentiated collateral frameworks, and climate stress testing. While these measures help integrate climate risks, challenges such as data gaps, concerns about market neutrality, and institutional constraints persist. Case studies from the European Central Bank (ECB), Bank of England (BoE), Dutch National Bank (DNB), and People’s Bank of China (PBoC) highlight diverse approaches to climate-aligned monetary policy. The study underscores the growing role of central banks in mitigating climate risks while identifying key barriers to implementation.