The E-axes Forum on Climate Change, Macroeconomics, and Finance

Josh Ryan-Collins

“Dealing with environment-related financial risks: towards a precautionary approach”

Event description

Josh Ryan-Collins presented the paper “Managing nature-related financial risks: a precautionary
policy approach for central banks and financial supervisors” he co-authored with Katie Kedward and Hugues Chenet. From the abstract:

This paper considers how financial authorities should react to environmental threats
beyond climate change. These include biodiversity loss, water scarcity, ocean acidification, chemical pollution and — as starkly illustrated by the Covid-19 pandemic — zoonotic disease transmission, among others. We first provide an overview of these nature-related financial risks (NRFR) and then show how the financial sector is both exposed to them and contributes to their development via its lending, and via the propagation and amplification of financial shocks. We argue that NRFR — being systemic, endogenous and subject to ‘radical uncertainty’ — cannot be sufficiently managed through ‘market fixing’ approaches based on information disclosure and quantitative risk estimates. Instead, we propose that financial authorities utilise a ‘precautionary policy approach’, making greater use of qualitative methods of managing risk, to support a controlled regime shift towards more sustainable capital allocation. A starting point would be the identification and exclusion of clearly unsustainable activities (e.g. deforestation), the financing of which should be discouraged via micro- and macro-prudential policy tools. Monetary policy tools, such as asset purchase programmes and collateral operations, as well as central banks’ own funds, should exclude assets linked to such activities.


Emanuele Campiglio
Associate Professor, University of Bologna

Josh Ryan-Collins

Josh is Head of Finance and Macroeconomics and Senior Research Fellow at IIPP. He is an economist with interests in money and banking, the economics of land, housing, and sustainable finance. Josh’s co-authored book Where Does Money Come From? (2011, New Economics Foundation) was the first comprehensive guide to the workings of a modern capitalist monetary system (the UK). The book helped establish the role of commercial banks in the money creation process and is used as a textbook to teach banking in the UK and US. Josh’s other main field of interest is in the role of central banks and financial supervisors in supporting environmental sustainability goals. He has given evidence to the European Parliament and central banks on these topics alongside a series of papers promoting the idea of ‘precautionary policy’ framework to legitimize a more interventionist forms of regulation. Josh has a Ph.D. in finance and economics from the University of Southampton Business School.

Paper and slides

“Dealing with environment-related financial risks: towards a precautionary approach” (paper)

“Dealing with environment-related financial risks: towards a precautionary approach” (slide)



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