Warning words in a warming world: central bank communication and climate change

Emanuele Campiglio, Jérôme Deyris, Davide Romelli and Ginevra Scalisi

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study climate-related central bank communication using a novel dataset containing 35,487 speeches delivered by 131 central banks from 1986 to 2023. We employ natural language processing techniques to identify and trace the evolution of key climate-related narratives centred around (i) green finance, and (ii) climate-related financial risks. We find that central bank public communication strategies are primarily driven by underlying institutional factors, rather than exposure to climate-related risks. We then study the impact of climate-related communication on financial market dynamics through both a portfolio and a firm-level analysis. We find that equity returns of ‘green’ firms outperform those of ‘dirty’ firms when central banks engage more frequently and intensely with climate-related topics.

Keywords: central banking; climate change; low-carbon transition; central bank communication; climate-related risks; green finance; text analysis; topic modelling; asset pricing (search for similar items in EconPapers)
JEL-codes: E44 E58 Q54 Z13 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2025-01-21
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:128518

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