The introduction provides an overview of the reasons why sustainable finance is high in the regulatory agenda, in the EU and increasingly elsewhere. It shows how the EU started to follow up on the UN goals for a more sustainable development, and how it translated those goals, first into its action plans and then into regulatory measures. The case for sustainability as a tool to manage climate and environmental risks is then explained. The introduction then summarises the contents and the main results of each chapter within the collection.

It has become widely acknowledged that the looming climate crisis and the necessary transition to a low-carbon economy can and will be financially material for financial institutions. Accordingly, microprudential supervisors have started including climate-related financial risks in their daily practices. Comparatively less attention has been given to the role macroprudential policies may play in addressing these risks from a system-wide perspective. This paper tackles climate risks as a macroprudential concern. It argues that macroprudential policies may play a key part in assessing and managing these risks, deploying new methodological means to map and model existing and evolving climate risks under different plausible scenarios. Insights from scenario analysis may help inform the use of ‘hard’ macroprudential tools to foster the robustness and resilience of the banking system against climate-induced shocks. Against the backdrop of the ongoing reform of the EU’s macroprudential framework, the paper explores how the macroprudential toolkit could be adjusted to the reality of climate-related financial risks.