Green Central Banking refers to central banks deliberately using their monetary policy instruments to incentivise climate-friendly market activities. For instance, targeted green lending programmes, targeted green bond purchase programmes, ""brown penalties"" (higher interest rates for pollution-intensive banks or businesses), lowering the financing rate for banks that offer collateral with a smaller carbon footprint, and mandatory disclosures of climate risks.
For the purposes of this debate, green central banking would support climate-friendly policies even at the expense of traditional monetary objectives such as targeting inflation rates, ensuring financial stability and market efficiency, as well as retaining neutrality of intervention.