Central Banks’ Climate Discourse Emerges as Catalyst for Global Green Bond Issuance

The International Monetary Fund’s Research Department, working with the Universidad Autónoma de Madrid, the UK’s Foreign, Commonwealth and Development Office, and the Ministry of Economy and Finance of the Government of Korea, has produced a provocative study on the overlooked influence of central banks. Authored by Marina Conesa Martínez, the working paper argues that speeches and public communication by monetary authorities have become a subtle but significant force in driving firms toward sustainable finance. Specifically, the research finds that when central banks talk more about climate change, companies issue more green bonds. In an era when the world needs trillions of dollars annually to meet the Paris Agreement’s climate targets, the findings reveal that communication itself is emerging as a tool for mobilizing capital.

Green Bonds: From Niche to Global Market

The backdrop for this study is the extraordinary rise of green bonds since their debut in the late 2000s by the European Investment Bank and the World Bank. Today, the market exceeds $2.5 trillion, financing renewable energy, clean transport, energy efficiency, and climate resilience. Their credibility relies on standards such as the Green Bond Principles and certification by the Climate Bonds Initiative, designed to ensure transparency and curb greenwashing. Yet, decisions to issue these instruments are heavily shaped by expectations about policy, investor sentiment, and regulation. Central banks, by signaling priorities and risks in their speeches, help shape precisely those expectations.

Measuring Words: The Climate Communication Index

To capture this influence, the author develops the Central Bank Climate Communication Index (CBCCI), based on nearly 19,000 speeches from 104 central banks between 1997 and 2023, collected via the Bank for International Settlements. Using natural language processing and a carefully designed climate dictionary, the index measures both the frequency and depth of climate-related references. The results show a steady rise in climate communication until 2021, with almost half of central bank speeches mentioning climate change. More recently, advanced economies have scaled back as inflation and geopolitics have taken center stage, while emerging economies have intensified their focus, reflecting their greater vulnerability to climate shocks that disrupt food systems and price stability.

Communication that Moves Markets

The empirical analysis demonstrates a striking connection between central bank speeches and corporate finance. A one-standard-deviation increase in the CBCCI corresponds to a two-percentage-point rise in the share of green bonds issued by firms. This effect is huge: given the long-term average of less than 2 percent, communication can double issuance. Even compared to the 2023 average of 9.3 percent, it still represents a meaningful 20 percent rise. The effect builds gradually, peaking after about a year, reflecting the preparation time needed for green bonds, which require frameworks, verification, and alignment with sustainability criteria. Firms treat central bank communication not as passing commentary but as credible signals of regulatory and market trends that warrant strategic financial shifts.

Not all firms react equally. Commercial banks, which are directly supervised by central banks and subject to disclosure mandates and climate stress tests, respond the strongest. Their strategic alignment with regulatory signals explains why their green bond issuance rises more sharply. Firms that closely monitor central bank communication, evident in the frequency of references in their earnings calls, also display stronger reactions, adjusting their financial strategies faster. Finally, companies with high exposure to climate risks or opportunities, whether vulnerable to stricter emission rules or positioned to benefit from renewable investments, are particularly sensitive to central bank messaging, seizing on signals as guides to future financing conditions.

A Subtle but Powerful Policy Tool

The robustness of the findings adds weight to the argument. The results hold across different datasets of speeches, broader climate dictionaries, and samples restricted to the recent decade of heightened green bond activity. They are somewhat stronger for central banks with explicit or implicit sustainability mandates, though communication from all institutions, whether national banks or supranational authorities like the European Central Bank, proves influential.

The conclusion is clear: central bank communication functions as a soft but powerful policy instrument. By articulating the economic risks of climate change and signaling support for sustainability, central banks reduce uncertainty, shape expectations, and direct capital toward greener projects without abandoning their traditional mandates of price and financial stability. This form of influence preserves market neutrality while still helping to channel finance into the energy transition.

The policy implications are profound. Central banks should continue clarifying the rationale for addressing climate-related risks and emphasize how these concerns tie into their core mandates. Greater transparency, coupled with international coordination on definitions and standards, would enhance credibility and reduce the risk of greenwashing.

The study also points to new avenues for research. One pressing question is whether the surge in green bond issuance actually translates into measurable reductions in emissions or remains largely symbolic. Another is how communication affects other financial sectors, such as insurance, which is deeply tied to adaptation strategies. Differentiating between messages on mitigation and those on adaptation could also sharpen market responses.

Central banks are not just guardians of monetary stability; they are now inadvertent architects of sustainable finance. Through the power of words, they are shaping how trillions in capital will be deployed in the coming decades, making speeches and statements as consequential to the climate fight as interest rate moves or regulatory decrees. In a world where climate change threatens systemic stability, this subtle form of influence may prove indispensable.