Two central bankers, one Manila stage: climate risk belongs in the mandate

The $200 billion argument

Banca d'Italia Governor Fabio Panetta told the Green Swan Conference that extreme weather caused more than $200 billion in direct damages in 2025, and that climate change is currently affecting economic and financial conditions — not a future threat but a present one. Climate-related shocks, he argued, can negatively affect inflation, which is why central banks must integrate climate risks into their mandates to keep monetary policy and financial supervision effective. m:…5083

That last step is the doctrinal move. Central bank mandates are about price stability and financial soundness; Panetta's case is that climate shocks now travel through both — inflation via supply disruption, stability via uninsured losses — so ignoring them is not neutrality, it is a blind spot. m:…5083

Sleijpen's framing

De Nederlandsche Bank's Olaf Sleijpen addressed the same conference in Manila. "Society faces a choice between a future that becomes increasingly dangerous and one that remains more manageable." He added, "The choice is not between a perfect and a less perfect future." m:…0781

Where Panetta made the technocratic case — damages, inflation, mandates — Sleijpen made the choice legible: managed adaptation versus unmanaged deterioration. Two governors, one stage, the same day: the central banking establishment is moving climate from the conference fringe to the mandate core. m:…0781

The channel is already live

The same day, Westpac New Zealand revised its 2027 economic outlook for New Zealand downward, citing energy market developments alongside long-term interest rates and the exchange rate as factors. A supply-side energy shock entering a central bank's policy-rate calculus is exactly the transmission channel Panetta described — no longer a scenario exercise. m:…0719

Westpac's downgrade is the empirical footnote to the Manila speeches: the shocks are not hypothetical. When a bank's economists cut a national outlook because of energy markets, the mandate debate is about whether to formalize what is already happening. m:…0719

Tools, not just mandates

Panetta also sketched the instrument side. Closing the protection gap requires a layered framework of private insurance, reinsurance, public backstops, and capital-market instruments, he said — and he pointed to Italy's compulsory insurance against floods, earthquakes, and landslides for firms outside the agricultural sector. Adaptation is generally less costly than repeated reconstruction, he argued, while adaptation finance remains severely underfunded, especially in emerging markets. m:…5083

He was candid about the gaps too: significant shortfalls in the availability, quality, and comparability of climate-related data, and a large uninsured portion of catastrophe losses. A mandate without measurement is a slogan — the data gap is the binding constraint on everything else the conference proposed. m:…5083

The supervision ask

Panetta's speech also carried a supervision message: financial institutions should integrate climate risk into the assessment of credit, market, operational, and insurance risks. Emerging market and developing economies face the more severe effects, he said, because of higher exposure and limited absorption capacity — which is why adaptation finance remains severely underfunded there. m:…5083

He pointed to two tools for closing that gap: artificial intelligence, which he said can improve climate modeling, weather forecasting, and early warning systems; and multilateral development banks, which can mobilize private capital for adaptation through guarantees and blended finance. m:…5083

The $200 billion figure, he noted, understates the problem: a large portion of natural-catastrophe losses remains uninsured, and the data to price them is patchy. Closing the protection gap is, in this telling, as much a financial-stability project as a climate one. m:…5083