NGFS chair Frank Elderson announces further work on monetary policy analysis, bridging data gaps, and assessing nature-related risks, plus more from the Cop26 finance day.
NGFS publishes Glasgow Declaration
European Central Bank’s Frank Elderson, speaking in his role as chair of the NGFS, announced the publication of a Glasgow Declaration of commitments to action by the group’s membership of central banks and financial supervisors.
In the coming years, the NGFS will “enhance and enrich” its climate scenarios, deepen its analysis on climate change into monetary policy, and intensify work to bridge data gaps. The network will also explore emerging topics such as biodiversity loss and climate-related litigation.
Banco Central de Reserva del Perú, the Central Bank of Jordan, Banco Central de la República Dominicana, the Turkish Banking Regulation and Supervision Agency, and the Jersey Financial Services Commission have all recently joined the NGFS, bringing its membership to 100 members and 16 observers.
“We were established as a coalition of the willing,” Elderson said. “With our NGFS Glasgow Declaration, we have become a coalition of the committed. Within our mandates, we are a coalition that will deliver.”
As part of its contribution to the Cop26, the NGFS also released progress reports on global supervisory and central bank climate scenario exercises, and on work towards its upcoming guide for supervisors. The group will also release a report on climate-related litigation in the near future.
The morning concluded with two sessions running concurrently. In the main conference hall, multilateral development bank and private sector leaders discussed the financing of a more sustainable world, while central bankers and ministers of finance met in private to discuss best practices to mainstream climate-related risks and opportunities into their financial and economic policy decision-making. The closed door session involved members of the Coalition of Finance Ministers for Climate Action and central bankers from the NGFS.
New PBoC monetary policy facility
Participants from various central banks and multinational institutions used Cop26’s finance day to outline the work of their own organisations.
People’s Bank of China governor Yi Gang addressed the conference by video, announcing that the central bank is working on a new monetary policy facility to provide low-cost funds for financial institutions to support clean energy and other green projects. Yi also said that China and the European Union would deliver a shared green taxonomy soon, emphasising that strong international cooperation is crucial to sustainable finance flows at a global level.
Mari Pangestu, managing director of development policy and partnerships at the World Bank, emphasised that two-thirds of greenhouse gas emissions come from developing economies and that new global climate-related disclosure standards need to be “proportionate and appropriate” for developing countries. She called for the needs of emerging economies to be accounted for in global disclosure standards, taxonomies and ESG reporting methodologies.
Klaas Knot, president of De Nederlandsche Bank and vice chair of the Financial Stability Board, spoke on how central bank movement towards sustainability will be coordinated with the work of the newly established ISSB. Global climate-related financial disclosures are “foundational” to sound risk management and financial stability, he began.
The recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) have gained enormous traction in both the private and public sector, he said, but are reaching the limits of what can be achieved voluntarily. “The time has now come to take it to the next level,” Knot said, and this means global sustainability standards. The TCFD will publish a progress report on the uptake of its recommendations in September 2022, he said.
Fernanda Guardado, director of international affairs and corporate risk at the Banco Central do Brasil, began by emphasising the importance of double materiality. The financial system is closely linked to physical and transitional climate risk, Guardado said, not only because of the adverse impact on their portfolios but also due to the effect that financial institutions have on the environment.
“Central banks need to remain on the frontier of knowledge and actions,” she said. “Having a sustainability agenda is important because sustainability issues have the potential to affect their two main mandates: monetary policy and financial stability.”
Saying that “we aim to lead by example”, Guardado also reviewed the environmental actions of the Brazilian central bank, which ranks second in the Green Central Banking Scorecard.
Launch of Climate Training Alliance portal
A new climate training facility was launched by the BIS, the NGFS, the International Association of Insurance Supervisors and the Sustainable Insurance Forum.
The Climate Training Alliance (CTA) portal, first announced last July, provides global training on climate risks for central banks and financial supervisors and brings together authorities at the cutting-edge of climate risk management so they can share their experience with the rest of the central banking and supervisory community.
“The CTA, via its online portal, will play a critical role in matching demand with the supply of training materials on climate-related issues for central banks and financial supervisors globally,” BIS deputy manager Luiz Awazu Pereira da Silva said, announcing the launch.
The CTA portal will be provided via the existing online learning platform of the BIS’s Financial Stability Institute (FSI). The FSI will publish a series of new climate-related tutorials in support of the CTA, including courses on the Basel Committee’s recent reports on climate-related risk drivers, transmission channels and measurement methodologies. Training materials will also be available on stress testing banks for climate change and on implementing the TCFD recommendations.
Tutorials will also cover the fundamentals of climate risk supervision across the financial sector, including assessment of financial firm’s exposure to climate risk and forward-looking risk modeling tools. They will be available via the FSI Connect platform, a subscription-only service for central banks, supervisory authorities, deposit insurers and other eligible public sector authorities.
35 countries agree to mandatory climate disclosures
The remainder of the Cop26 finance day focused on delivering commitments to provide finance for emerging and developing markets. Also discussed were efforts by development finance institutions and donors to unlock private climate finance, and deliver on the broken $100bn a year promise made in 2009. It was followed by the Fourth High-Level Ministerial Dialogue on Climate Finance, a mandated event reviewing work on long-term climate finance during the last three years.
New commitments were made by 13 developed countries to increase financial support to developing countries to deal with the impacts of climate change, with more expected in the coming days. Ministers were also strongly supportive of the earlier announcement on common sustainability standards and 35 countries have agreed to mandatory actions on climate-related financial disclosures.
The day ended with a press conference introduced by Cop26 president Alok Sharma. “I’m very pleased to say that we’re off to a good start at Cop26,” he said. UNFCCC executive secretary Patricia Espinosa reviewed the day’s developments in climate finance and called the announcements made “encouraging”. Most of the finance-related questions focused on government support for developing nations.
Finally, not all of the day’s developments happened in Glasgow. Declarations, announcements and other Cop26-related activities were reported from central banks in Iceland, Canada, Ireland, India and Costa Rica, mostly concerning the integration of climate change into decision-making processes.
This page was last updated November 4, 2021
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