First, a monetary policy which has price stability as its primary objective is a necessary condition for avoiding asset price bubbles and promoting financial stability. With the benefit of hindsight, it seems that some of the financial imbalances which built up prior to the crisis resulted from monetary policies which were not fully in line with the objective of price stability.
Many institutions cannot act and build capacities alone, particularly on climate risk scenario analysis. This is a complex task that requires new skills, long-term forward-looking methodologies and dialogue with climate scientists. Integrating scenario analysis into risk management would allow financial institutions and markets to price financial risks better.