Central banks’ direct role in the development process, especially in less developed economies, stems from the absence of efficient financial markets and institutional structures, which are pre-requisite for the effective transmission of monetary policy to the real economy.
They suggest that companies take a scenario-based approach and extend their assessments decades into the future. Bank staff contributed to this effort and are now developing Canada-specific climate scenarios.2 These will make it easier for financial institutions to use scenario analysis as a forward-looking tool to better assess and manage climate risks.