Weekly roundup: FSOC reaction and BIS green bond plans

October 24, 2021|Written by Graham Caswell and David Clarke|Hong Kong Monetary Authority, Te Pūtea Matua / Reserve Bank of New Zealand, Bank of England, European Central Bank, Federal Reserve

Climate advocates react to FSOC report, New Zealand first to mandate climate disclosures, BIS to issue Asia-focused green bonds, and more from this week in green central banking.

Climate advocates react to FSOC report

Climate and finance groups have continued to give their reaction to the Financial Stability Oversight Council (FSOC) report on climate risk published on Thursday. They have welcomed the council’s recognition of the climate crisis as a driver of systemic risk, but regret that the report stops short of pushing regulators to slow the flow of money to fossil fuels.

Alex Martin, a senior policy analyst at Americans for Financial Reform hopes that stronger interventions will soon follow.

“Future activities of the FSOC must look comprehensively across financial regulators and recommend further actions to mitigate systemic risk”, he said in a statement.

“While a few regulators such as the US Securities and Exchange Commission (SEC) are moving effectively in the right direction, there are also clear laggards like the Federal Reserve, and this must change. Each of the regulators needs to move quickly to implement these basic recommendations on assessment, disclosure, and scenario analysis, and take further regulatory steps with teeth that can truly rein in risky finance.”

Jeff Hauser, executive director of the Revolving Door Project suspected that behind-the-scenes wrangling between regulators had diminished the report’s ambition.

“It’s extremely disappointing to see this long-awaited report be so watered down by what can only be described as climate apathetic FSOC members.” he said.

“While the report will allow do-good members such as the Securities and Exchange Commission to continue their actions to mitigate climate-related risks, it is clear that Yellen’s insistence on a consensus vote spoiled the report’s potential. Finding consensus between those who see or don’t see our climate reality is not democracy in action: it’s homicidal.”

David Barmes, senior economist at Positive Money, put the report in an international context, stating, “This underwhelming report comes just days after the European Central Bank expressed support for climate capital rules and portfolio restrictions, and the UK government announced a requirement for net-zero transition plans. As major financial regulators the world over start stepping up on climate, the US continues to fall further behind.”


Citizen’s panel calls for BoE climate champion

The Bank of England should appoint one of its governors as a climate champion and should manage a public list ranking financial institutions on climate action, according to citizen panelists who participated in the central bank’s Citizen Forum initiative earlier this year.

A report published this week summarised the findings of the consultation exercise, which involved 124 private citizens meeting over two sessions to discuss climate change. Participants also said that green choices need to be the easiest and most competitively priced option, and called for a carbon tax, robust regulation of financial institutions, green impact assessments and cheaper green borrowing.


New guides for UK financial institutions

A financial industry forum jointly convened by the UK’s Financial Conduct Authority and Prudential Regulation Authority has published a series of guides to help financial institutions develop their approach to addressing climate-related financial risks and opportunities.

The Climate Financial Risk Forum guidelines are written “by industry, for industry” and focus on risk management, scenario analysis, disclosure, innovation, and climate data and metrics.

The group is also developing an online climate scenario analysis narrative tool to support smaller firms, planned to launch in the first quarter of 2022.


BIS plans Asia-focused green bond fund for central banks

The Bank for International Settlements (BIS) has announced the development of an Asian green bond fund to channel global central bank reserves to green projects in the Asia Pacific region.

The fund will “be designed to provide a pipeline for central banks to invest in high-quality bonds issued by sovereigns, supranationals, and corporates that comply with strict international green standards,” the BIS said in a press release. The new fund will be developed with the Asian Development Bank and other development financial institutions, and will be the third green bond fund launched by the BIS in the past two years.


New Zealand first to mandate climate-related disclosures

New Zealand has become the first country in the world to pass a law forcing financial institutions to disclose their climate-related risks and opportunities. Passed yesterday, the Climate-Related Disclosures Bill will require about 200 of New Zealand’s largest financial companies to disclose “clear, comparable and consistent information” aligned with the recommendations of the Taskforce on Climate-Related Financial Disclosures.

Although the UK, Switzerland and other nations are working towards mandatory climate-related disclosure, New Zealand is the first to enact these requirements.

This page was last updated October 24, 2021

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