Why Central Banks Need to Take Human Rights More Seriously

Abstract

Most central bankers think that there is a tenuous connection between the operations of central banks and human rights. Their responsibility is to concentrate on the relatively narrow set of macro-economic variables that are relevant to their mandates and to leave to their country’s political leadership the decisions dealing with the complex and politically sensitive variables that affect the functioning of the economy and society.

This position is no longer tenable. Climate change is forcing the central banking community to rethink their view of their responsibilities. The recent release of the Network for Greening, the Financial System’s first comprehensive report on climate change as a source of financial risk, is the latest indication that central banks are beginning to take environmental risks more seriously in their monetary and financial operations. Their focus on climate change is inevitably pushing central banks to start paying more attention to other environmental risks and to social considerations more generally. In other words, central bankers are being inexorably pushed to consider the relationship between central banking and human rights, particularly economic and social rights.

This article briefly describes this relationship and its implications for central banks. It makes two points in this regard. First, central banks have human rights responsibilities. Second, both their monetary and financial operations have unavoidable human rights impacts which need to be incorporated into their decision making and governance procedures. In order to make these points the article is divided into three parts. The first part discusses the human rights responsibilities of central banks. The second part discusses how they should deal with their human rights responsibilities. The third part is a conclusion.

Keywords: central banks, human rights, climate change, environment and social risk, monetary policy

JEL Classification: E52, E58, K30, K33