In an opening address to the annual summit of the Taskforce for Climate-Related Financial Disclosures (TCFD), Haruhiko Kuroda, governor of the Bank of Japan (BoJ), explained how the bank would use institutions’ climate disclosures as the basis for a new zero-interest loans scheme.
The BoJ is among a growing number of central banks which are deploying interventionist policies to align bank lending with the low-carbon transition, rather than relying solely on disclosures to effect market discipline.
Kuroda told the summit on Tuesday that starting in December, the BoJ will begin providing zero-interest funds to financial institutions for loans and investments that contribute to addressing climate change. In order to access the scheme, institutions will be required to disclose information based on the TCFD recommendations, while specific allocative decisions will be left to the discretion of the institutions themselves.
The BoJ joins the European Central Bank (ECB) and the Bank of England (BoE) in announcing plans to incorporate climate criteria into their monetary policy frameworks. Both the ECB and the BoE will begin giving preference to green assets for purchases, while the ECB will adjust its collateral framework to make eligible a wider range of green securities.
Kuroda has previously highlighted the limitations of the so-called ‘market neutrality’ principle. In July, he said that market neutrality “needs to be interpreted with some latitude” and that ignoring the costs of climate change in resource allocation is not a neutral position.
He told the summit this week that the BoJ would publish information about its own business practices using the TCFD guidelines, although it is unclear whether it will follow the BoE’s example and carry outt hese disclosures across its entire operations.
“The most important point is we have to start now,” Kuroda said in a question and answer session following his address, adding that the central bank will make adjustments to its loans scheme if needed.
This page was last updated October 7, 2021
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