Weekly Roundup: Green mandate for Hungarian central bank

As well as the announcement of President Biden’s executive order on climate risk, the past seven days have seen discussions and development across the globe.

The Wall Street Journal on green central banking

The week began with a Wall Street Journal article by Simon Clark focusing on central banking and climate change. Clark contrasted the cautious movements of the Federal Reserve with the climate actions of other central banks and financial regulators. Clark also examined concerns about expansion of the Fed’s mandate to include environmental objectives.

Monday saw a follow-up article (paywall) with an overview of international climate-related financial regulation in the run up to next month’s international Green Swan conference on green central banking.

Bank of England executive director on climate scenario analysis

Tuesday saw a speech from the Bank of England (BoE) executive director Sarah Breeden on how UK financial services firms help the move to a net-zero economy. Breeden, responsible for the supervision of UK deposit-taking financial institutions, also spoke about the role of climate scenario analysis and about the BoE’s experiences of designing climate scenarios.

“It is critical that financial firms recognise now that the race to net zero has started,” she told the Environmental Association for Universities and Colleges. “They need to run climate scenarios as part of business as usual risk management and embed climate risk management within day-to-day decision-making. Breeden also warned that “time is running out” and that “perfection tomorrow cannot be the enemy of progress today”.

Latin America regulators launch new sustainability group

On Wednesday, financial regulators in Latin American launched a sustainability group backed by the Network of Central Banks and Financial Supervisors for Greening the Financial System (NGFS). The new Network of Regulators for Sustainable Development aims to “support financial regulators, supervisors, central banks, and public agencies on the development of country-level strategies toward sustainable financial sectors”. It is an initiative of the Inter-American Development Bank and the Association of Banking Supervisors of the Americas.

Green mandate for Hungarian central bank

Wednesday also saw the Hungarian parliament adopt legislation to give an explicit green mandate to the Magyar Nemzeti Bank (MNB), the country’s central bank. The new law requires the central bank to support Hungarian environmental sustainability policy where this does not conflict with the bank’s primary mandate of price stability. To accompany the new mandate, the MNB released a comprehensive overview of the actions and commitments it has made so far to “mainstream the transition to a net-zero economy”.

Developments in climate risk

There has also been substantial movement to identify and address climate-related financial risk, with developments in Canada, the United States, Europe, and the Philippines. Thursday saw the Bank of Canada highlight vulnerability to climate risk in its Financial System Review while the White House released a wide-reaching executive order on climate risk targeting US financial regulators.

Climate risk is also featured in the European Central Bank’s bi-annual Financial Stability Review. Meanwhile, the Bangko Sentral ng Pilipinas will soon require Filipino banks and other financial institutions to integrate climate change into their enterprise-wide risk management frameworks.

Bank of England consults on green monetary policy

The week ended with the BoE releasing a discussion paper outlining the options for greening its corporate bond purchase program and seeking input on how the bank can green its corporate QE programme. The public consultation will run until July 2nd.