Scorecard update: G20 central banks failing on climate

Central bankers and financial supervisors of the world’s major economies are failing to meaningfully respond to the climate and ecological crisis, finds a comprehensive analysis from  thinktank Positive Money and Green Central Banking.

The latest update of the Green Central Banking Scorecard shows that policymakers remain stuck in discussion and data-gathering exercises, with no high impact emissions or biodiversity policies implemented by any G20 monetary or prudential authority.

Released ahead of this weekend’s G20 summit in Rome, the scorecard reviews the climate and biodiversity policies of G20 central banks and supervisors across four categories: research and advocacy; monetary policy; financial policy; and leading by example.

While most countries score full marks for research and advocacy, this has not been translated into substantive monetary or financial policy action, and almost all countries fail in these areas. Central banks are also performing poorly in disclosing their own environmental risks and aligning their non-policy portfolios with the Paris Agreement targets.

Significant changes over the past seven months include China falling from first to third place due to credit guidance favouring domestic coal production. France, a eurozone member, rose to the top spot as a result of the European Central Bank’s (ECB’s) climate action plan and consideration of climate capital rules and bank portfolio restrictions. If implemented, these prudential policies would be the first “high impact” climate actions classed as ‘high impact’ of any G20 central bank or supervisor.

The ECB’s policy developments also improved the scores of eurozone members Italy and Germany and helped the European Union replace the UK in fourth position. However, the Banque de France marked itself out from its European counterparts to clinch the top spot largely due to its responsible investment charter, which includes a phased withdrawal from fossil fuel investments.

India advanced ahead of the US as a result of the Reserve Bank of India joining the Network for Greening the Financial System and considering climate stress tests on top of its pre-existing green credit guidance policy. South Korea also improved in the rankings due to regulators’ support for mandatory climate-related financial disclosure and a planned green lending programme.

In contrast, the UK has slipped behind the European Union to fifth place despite having improved its score since the last assessment. In the absence of any significant policy changes, Australia, Canada and the US have also fallen in the rankings. Canada and the US are now joint 14th, well behind neighbouring Mexico.

Overall the climate performance of central banks and financial supervisors remains poor. Although in the leading position, France scored only 52 out of a possible 130 and the majority of countries scored far below that. All G20 central banks had very low scores for climate-related monetary policy and for leading by example, and France was the only country to score more than half the points available for financial and prudential policy.

Argentina and Saudi Arabia remain unchanged at the bottom of the G20 rankings, with no indication of their monetary and prudential authorities taking any steps to take climate risk seriously.

“The slow progress from central banks is deeply troubling ahead of crucial climate talks where finance is supposed to be a key focus,” said senior economist and scorecard author David Barmes, calling for rapid action in response to climate and ecological breakdown.

US commentators focused on the role of Federal Reserve chair Jerome Powell in the Fed’s poor scorecard performance. “Under Powell’s leadership, the Federal Reserve has cemented its position as a climate laggard among major central banks,” said Akiksha Chatterji, digital campaigner at Positive Money US, and called on US regulators to urgently develop concrete steps to reduce climate risks to financial stability.

Yevgeny Shrago, policy counsel at Public Citizen’s Climate Program, also responded to the scorecard update with criticism of Powell’s inaction on climate. “The Fed under Jerome Powell’s leadership continues to waste time that the financial system doesn’t have to prepare for the ongoing and growing threats from the climate crisis,” he said.

“With crucial climate finance talks kicking off this week, President Biden should demonstrate his commitment by selecting a slate of diverse Fed leaders who will take climate risk seriously and move the Fed from laggard to leader.”

Endorsed by 24 civil society organisations, the Green Central Banking Scorecard was initially published last March and is based on an extensive literature review, expert consultation, and bilateral interactions with central bankers and supervisors. This is the first update to the comparative exercise.