By David Barwick – FRANKFURT (Econostream) – European Central Bank Executive Board member Frank Elderson defended the ECB’s climate-related work on Wednesday as a necessary part of its mandate, arguing that price stability, financial stability, and bank resilience cannot be safeguarded if policymakers ignore the economic effects of climate and nature shocks.

Elderson, who also serves as vice chair of the ECB’s Supervisory Board, said in an interview with Dutch newspaper NRC that the central bank was not making climate policy itself, but had to account for the inflationary and financial consequences of climate change.

“We are not policymakers,” he said. “But we do have to take it into consideration.”

To illustrate the point, Elderson cited the impact of climate change on the Rhine in 2022, when low water levels disrupted navigation and pushed food price inflation higher, arguing that overlooking such effects would mean ignoring a key driver of inflation.

He also tied Europe’s dependence on fossil energy directly to the ECB’s price-stability objective, saying it was the central bank’s job to understand how political choices affected its ability to deliver on its mandate.

On the policy side, Elderson said the ECB was already incorporating climate considerations into its economic models and collateral framework, and suggested that more structural tools could be examined as part of the ongoing operational framework evaluation.

“If there are two ways to ensure price stability, and one of them also contributes to the European Union’s climate and nature goals, then that is the option you should choose,” he said.

Asked specifically about the possibility of dual interest rates for greener lending, Elderson declined to go further, saying only: “I’d rather not get ahead of those discussions.”

Beyond the monetary-policy angle, Elderson said banks had made “sound progress” in identifying and managing climate- and nature-related risks, though he also said gaps remained and warned against broader deregulation of the banking sector at a time of elevated uncertainty.

“It is a good thing that we’ve been able to get the banks back on a sound footing,” he said. “Undermining that, especially under today’s uncertain conditions, strikes me as highly unwise.”