Cop26: central banks make further climate commitments

In a move coordinated with the Cop26 Glasgow Declaration from the Network for Greening the Financial System, central banks and financial supervisors and regulators from around the world have committed to integrate climate considerations into their decision-making processes.

The announcements were made on Wednesday as part of finance day at Cop26, which also saw the International Accounting Standards Board reveal a new body to develop global climate reporting standards.

The European Central Bank promised to introduce climate disclosure requirements for its collateral framework and to incorporate climate change criteria into its corporate sector asset purchases by the end of 2022. Other commitments, many of them previously announced, include enhancing the central bank’s macro models to take climate impact into account, and developing standards to include climate change risks in the Eurosystem’s internal credit ratings.

The Federal Reserve Board issued a brief statement promising to “address climate-related risks in an analytically rigorous, transparent, and collaborative way through our domestic work with other federal agencies”.

The Reserve Bank of India published a statement of commitment to support the greening of India’s financial system. The bank has promised to integrate climate-related risks into financial stability monitoring and to explore the use of climate scenario exercises.

In a joint statement, the Reserve Bank of Australia and the Australian Prudential Regulation Authority promised to include climate-related risks in financial stability monitoring and microsupervision, and to assess the effect of these risks on the macroeconomy and financial stability.

The New York State Department of Financial Services (DFS) has established a new division to integrate climate risks into its supervision of regulated firms. The DFS was the first US financial regulator to join the NGFS and is the first state banking regulator in the country to establish a climate risk division.

The Bank of Canada has pledged to assess the effects of climate change on the macroeconomy and price stability, and improve its climate-related risk management of the Canadian financial system. It will also review its financial market operations to consider climate-related financial risks and opportunities, and work to green its own operations.

The Central Bank of Iceland made an “individual pledge to Cop26“, committing to include climate risk in stress testing of the Icelandic financial system and financial market participants, and to achieving carbon neutrality in its own operations.

The Banco Central de Costa Rica will publish a roadmap on how it will integrate climate change and environmental considerations into its decision-making processes. Due by the end of the year, the roadmap will cover integrating sustainability considerations into monetary policy, incorporating climate-related risks into financial stability assessments, and greening the central bank’s international reserves.

The Central Bank of Ireland has set out climate-related supervisory expectations for regulated firms and has committed to embedding climate change considerations into supervisory and financial stability assessments. It will also establish a climate forum of financial system stakeholders to build shared knowledge and understanding of climate change implications for the Irish financial system.

The Bank of Lithuania will make sustainability a strategic objective and work to develop green finance.

Climate commitments also came from the Croatian National Bank, the Bank of Greece, Swiss National Bank, and other central banks from around the world.