Weekly roundup: New training alliance and BOJ Climate Strategy

Central Banks’ and Supervisors’ Climate Training Alliance

Launched last Friday, the new Climate Training Alliance (CTA) is a global initiative to establish a dedicated online portal for training on climate risks for central banks and financial supervisors. Collaborators in the project include the Bank for International Settlements (BIS), the Central Banks and Supervisors Network for Greening the Financial System (NGFS), the International Association of Insurance Supervisors (IAIS) and the UN-convened Sustainable Insurance Forum (SIF). Announced during the G20 Venice Climate Summit, the new training portal will use the existing FSI Connect tutorials and training platform run by the BIS.

New ECB strategy misses the financial system’s effects

Monday also saw an article from Columbia University Professor Adam Tooze reviewing the European Central Bank’s (ECB’s) newly revised strategy and the process that led to it. “The most basic strategic shift must remain unspoken,” says Tooze, referring to the normalisation of quantitative easing by the ECB’s Pandemic Emergency Purchase Programme (PEPP). “What is missing from the ECB’s embrace of climate policy is an acknowledgement of the financial system’s own agency,” he says. “It is not addressing the fact that the financial system itself funds the fossil-fuel economy and thus drives the climate crisis.”

Uneven climate impact on European financial system

Another review, published Tuesday by VoxEU, looks at the recent ECB and European Systemic Risk Board (ESRB) joint study showing climate risk is highly concentrated among a small number of large European banks. Paul Hiebert, head of the Systemic Risk and Financial Institutions Division at the ECB, summarises the methods and findings of the study, which linked physical climate risk maps to the addresses of 1.5 million firms. “These advances in empirical understanding of risks provide valuable evidence,” says Hiebert, “laying the groundwork to support nascent macroprudential policy considerations, in an increasingly heated policy debate.”

Fed “not ready” for climate stress scenarios

On Thursday US Federal Reserve Chair Jerome Powell told the Senate Banking Committee that the central bank was not ready to use climate stress scenarios. “We haven’t decided to do that yet .. my guess is that’s a direction we’ll go in but we’re not ready to do that yet,” Powell said, calling the use of climate stress scenarios by European central banks “a very profitable exercise, both for the financial institutions and for regulators.” Outlining the Fed’s response to climate change he focused on data collection and research, appearing to apply traditional risk management methods to unprecedented climate risk.

Covid stimulus money funding climate change

Only 10.6% of $17.2 trillion in the Covid-19 stimulus funding of major economies will have a positive impact on the environment, finds a research report from Vivid Economics and Finance for Biodiversity (F4B) published on Thursday. The sixth and final edition of the ‘Greenness of Stimulus Index(5a) (GSI)’ analysed the Covid-related stimulus in G20 and ten other countries, finding that US$4.8 trillion (28%) of the total stimulus announced to date is going to environmentally intensive parts of the economy, but only US$1.8 trillion (10.6%) will have a net positive impact on the environment and green sectors. “It’s hard to be optimistic when you look at the evidence about how much climate change and nature have really not been considered in public spending decisions,” said lead author Jeffrey Beyer.

New Bank of Japan Climate Change Strategy

The week ended with the publication of a Climate Change Strategy document from the Bank of Japan (BOJ), giving a short outline of the Bank’s direction on climate change and accompanied by two summary slides. The strategy covers monetary policy, financial supervision, research, international finance and the Bank’s own operations and communication. Bank supervision strategy exclusively revolves around climate risk, and the document provides no new details about the BOJ’s new green lending facility, announced last month. But it is a work in progress, with the BOJ promising to “constantly review its [climate] measures and make adjustments where needed.”