Central banks risk being blindsided by climate-driven shocks to global labour markets unless they overhaul their approach to monetary policy, a report published on Wednesday by the London School of Economics warned.
The study found that even under relatively optimistic scenarios in which global warming is limited to 1.5 to two degrees, climate change would lower labour productivity, particularly in agriculture, construction and other sectors exposed to heat.
With up to 1.2-billion workers in 182 countries vulnerable to climate disruption, the report by the Centre for Economic Transition Expertise CETEx urged monetary authorities to pay greater attention to environmental risks, from natural disasters to the consequences of the green transition.
'Our research shows central banks should seek to integrate environmental employment risks into their policies and operations,' said Joe Feyertag, senior policy fellow at CETEx and author of the report.
The European Central Bank and the Bank of England have highlighted the dangers stemming from climate change and its potential impact on inflation, growth and banks' health.