A Nordic perspective on climate and central banking, a new targeted green lending programme from the Bank of Korea, coordinated climate protests at the Fed, ECB, Bank of England and Bundesbank and more from this week in green central banking.
Report on ECB secondary mandate
A new report from Positive Money Europe finds that the European Central Bank’s (ECB) secondary mandate of supporting EU economic policies and objectives is as legally binding as its primary mandate of price stability, but has so far been neglected by the central bank.
Explicitly referring to the secondary mandate would increase the ECB’s legitimacy and ability to act on climate change and societal challenges, the authors suggest, but the ECB should not cherry-pick its secondary objectives by itself. Instead, the report recommends that the ECB should coordinate with the European Parliament and the Council of the EU to specify what policies to support.
A Nordic perspective on climate and central banking
Central bank governors and deputy governors from Iceland, Finland, Denmark, Sweden and Norway came together on Monday to discuss climate change and central banking. Hosted by the Norges Bank in Oslo, the workshop programme included presentations on analytical work, data gathering, and climate risk. Riksbank deputy governor Anna Breman spoke on the implications for monetary policy of climate change and the event concluded with a panel discussion on the key priorities for central banks’ work related to climate change. A recording of the proceedings is available on the Norges Bank website.
Banco de España report on banks, central banks and climate change
A new report from the Spanish central bank examines the effects of climate change and the transition to a low-carbon economy on the financial system, along with progress made in addressing these issues. The report reviews climate-related finance, micro and macroprudential supervision, central bank mandates and the integration of sustainability factors into monetary policy. It essentially offers a review of Spanish, EU and international work on climate change by central bankers and financial regulators and concludes with a warning that, while there has been progress, “the road ahead is long and we have no time to lose”.
Calls for a green Bundesbank president
The successor to outgoing Bundesbank president Jens Weidmann should have proven ability in digitalisation and sustainable finance as well as in monetary policy, argue David Marsh and Danae Kyriakopoulou in an article for the OMFIF central banking forum.
Recent german elections and Weidmann’s resignation last week give the incoming coalition government the opportunity to “craft a new form of central bank for the future”, they say. With the right person at the helm the Bundesbank can be a world-class leader in climate mitigation, they conclude, warning against last-minute bargaining for the position based on gender and party affiliation.
Bank of Korea announces green bonds and lending
The South Korean central bank has announced plans to issue green bonds and to introduce a targeted green lending programme in response to the climate crisis. Financial incentives will be offered to banks providing funds to SMEs in eco-friendly sectors, the bank said, promising to be “fully committed” to policy measures aimed at mitigating climate change. The new policies follow the establishment of a climate change response task force to comprehensively review and analyse the role of the central bank in responding to climate change.
WWF launches climate assessment of central banks and supervisors
Conversation charity WWF has launched a comprehensive assessment of measures taken by central banks and financial supervisors to integrate environmental and social considerations into their mandates and activities. Covering 38 countries, the assessment is organised under the Sustainable Financial Regulations and Central Bank Activities (Susreg) framework and contains 68 indicators, organised around banking supervision, central banking and the enabling environment.
The report says that, given the urgency to act in the face of mounting climate and environmental crises, a precautionary approach is needed but few central banks or regulators are using monetary, regulatory or prudential tools to mitigate climate risks. In addition, none are using capital and liquidity requirements. This is the first WWF Susreg assessment exercise and will act as a baseline for future updates twice a year.
Central banks focus of unprecedented day of climate action
Communities rallied outside central banks around the world on Friday to demand they take immediate steps to account for the risks posed by the climate crisis. The Federal Reserve, ECB, Bank of England and Bundesbank were among the institutions targeted. Organisers believe this is the first time central banks have been the focus of climate activism on such a global scale, and represents growing public concern that financial regulators are being too slow to exercise the significant powers at their disposal.
Planned events include gatherings at over a dozen Federal Reserve branches in the US calling on the Fed to phase out all high-risk fossil fuel financing by 2030. In the UK, poets, dancers and organisers from across the Pacific Islands will light lanterns outside the Bank of England to commemorate those already suffering from the impacts of the crisis, including victims of the ongoing famine in Madagascar.
This page was last updated October 29, 2021
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