The NGFS has acted quickly in looking into nature-related risks, well ahead of the financial industry. We collaborated with INSPIRE2, an independent research network, to produce reports setting out the importance of biodiversity for the macroeconomic and financial systems. These reports also made preliminary recommendations on how central banks and supervisors might align themselves with the structural transformations required to deliver a nature positive global economy. The NGFS, in the next phase of its work, will aim to equip central banks and supervisors with a common base of knowledge of nature-related risks. We will provide recommendations on how nature-related risks can be integrated into the other work programmes of the NGFS, including supervision, scenario analysis, and monetary policy. We will make nature-related risks more tractable, by focusing on nature-related risks with a nexus to financial risks. We will identify a few local case studies to work through concrete examples where the link from ecosystem degradation to climate change is clear, such as in deforestation. Finally, CAPACITY BUILDING AND TRAINING. The NGFS will provide guidance on how central banks and supervisors can build up their capabilities in climate-related and environmental risks. The importance of building capacity and expertise on climate issues within the central banking and regulatory community has been consistently espoused by the NGFS since its beginning. Our members are at different stages of progress in their ability to address climate-related and environmental risks. We want to make sure they have the support they need to make meaningful progress in addressing these risks.

Third, the impact of climate change on MONETARY POLICY. The NGFS will seek to gain an understanding of how climate change and mitigation actions should be considered in the conduct of monetary policy. From a central bank perspective, climate change is the ultimate supply-side shock. The effects of climate change and mitigation actions are likely to be of a scope and intensity that will affect the economy across both cyclical and structural dimensions. This is a complex endeavour, given the considerable uncertainty surrounding these effects. The NGFS will seek to provide central banks with the requisite tools to make sense of the implications of climate change for monetary policy. We will focus on macroeconomic modelling of critical transition issues, to help central banks better analyse their impact on the economy. We will explore climate-related adjustments that central banks could implement to ensure the smooth conduct and efficacy of monetary policy operations. We will explore how monetary policy operations could potentially support the transition to a net-zero economy. Fourth, NET ZERO FOR CENTRAL BANKS. The NGFS will provide guidance on how central banks can make the transition to a net zero environment. It is important that we central banks who are part of the Network for Greening the Financial System “lead by example” and make an effort to green ourselves. This would include adopting some of the good sustainability practices central banks and supervisors have been espousing to financial institutions.