Scientific paper ID 2459 : 2024/2

The financial system is a fundamental part of economy that ensures the cash flow through all banking and non-banking financial institutions and markets. The financial system’s durability is of great importance for achieving price stability and economic sustainability. In the current study the financial health of credit institutions and financial markets is considered as a significant element and a necessary condition for the implementation of a better monetary policy by the European Central Bank (ECB) that aims at achieving financial and environmental sustainability. The Central Bank`s main toolkit for regulating the financial market economic activity in the context of the market mechanism is presented. The alteration in interest rates is seen as an essential tool for maintaining inflation at the medium-term target level of 2% and achieving price stability.

The undeniable necessity for action to cope with climate alterations and the carbon transition is a major global challenge and a political priority for the European Union. This determines the need for the present study to also present the ECB`s environmental policy to reduce carbon emissions in accordance with the Paris Agreement to limit the global warming. The environmental policy of the Central Bank is examined in the context of environmental sustainability and its impact on enterprises’ financial sustainability to achieve economic stability.