Both the Bank and the government would be studying this possibility. The third core objective of Eurosystem relates to sharing expertise and fostering wider action towards the adoption of clean source of energy. Such efforts will take several forms. The Eurosystem is working to enhance transparency by bridging data gaps working in tandem with European and international partners. Transparency shall apply to the Eurosystem’s own actions as well. The ECB and the central banks of the euro area will be disclosing climate-related information about corporate purchases, non-monetary policy portfolios and environmental footprint. Lastly, the Eurosystem is also striving to reduce the environmental footprint of its day-to-day corporate activities. The Central Bank of Malta is doing its part. In line with the Eurosystem’s common stance for climate change-related Sustainable and Responsible Investments (SRIs), the Bank is incorporating such principles in the management of its non-monetary portfolio of assets. The Bank manages part of its assets externally through mandates, ETFs and mutual funds. In the selection of asset managers, the Bank verifies that they have subscribed to the United Nations Principles for Responsible Investments and therefore committed to include ESG considerations in all their investment decisions. In accordance with such principles, the Central Bank disinvested from companies involved in the tobacco industry and/or linked to the production of nuclear weapons in 2021, while progressively increasing the share of green, social and sustainable bonds in its internally managed portfolios. 8  In conclusion Global warming requires us to rethink thoroughly the way we live, produce and consume.

It will also affect industries like construction, which rely on outdoor work. Lower income countries are particularly vulnerable to global warming, while coastal states are vulnerable to rising sea levels. These shocks to output cannot but have significant implications for prices. Climate change will impact how the economy operates and will exert a substantial influence on price dynamics. Indeed, given the Eurosystem’s primary objective is price stability, it is important for monetary policy makers to be aware of these effects as they set the policy stance. Monetary policy is going to be affected by climate change, as well by the measures taken by governments to address it. First, climate change will affect the structural parameters of the economy. One key parameter is the natural rate of interest. The natural rate of interest is fundamental notion of central banking. When interest rates lie below the natural rate, monetary policy is accommodative, and vice-versa. In turn, the monetary policy stance has an impact on the price level. There is uncertainty over the direction of the impact of climate change on the natural rate- our r star: climate factors could contribute to the secular decline of natural rates in line with prevailing structural trends such as demography. Conversely, higher investment to combat emissions could lead to a rise in productivity which may push up r-star. 3  Second, climate change will alter the transmission mechanism of monetary policy. The value of assets posted as collateral by financial intermediaries could decline due to the higher frequency of extreme weather events.