Weekly roundup: ECB green monetary policy plans and Debelle leaves RBA

March 18, 2022|Written by David Clarke|Reserve Bank of Australia, European Central Bank

Monetary policy can assist the urgent shift to green energy, says the ECB’s Isabel Schnabel, the RBA’s deputy governor leaves for a green energy firm, and more from this week in green central banking.

Monetary policy can assist urgent shift to green energy, says ECB’s Schnabel

The European Central Bank (ECB) will contribute to the greening of Europe’s economy while keeping inflation in check, board member Isabel Schnabel has said.

She said the bank could tilt its corporate bond portfolio in line with the Paris agreement, once it has decided on how the market neutrality principle, which is currently guiding its bond purchases, should be modified.

The ECB has already committed to adjust its corporate bond purchase framework to incorporate climate criteria. It has also said it will begin disclosing climate-related information on the purchases at the start of next year.

Schnabel also hinted that the ECB was interested in implementing a green targeted long-term refinancing operation. She said that it was difficult on a practical level, because banks do not yet effectively differentiate between green loans and other loans. She said the ECB was working to accelerate progress towards commonly-agreed definitions and disclosure standards.

Speaking at a conference in Frankfurt, Schnabel warned that inflation was likely to be a persistent feature, even following the current energy crisis, as there would be a positive demand shock resulting from huge investment in the green transition.

But she expressed confidence that monetary policy would provide an effective response.

“Greenflation is much more likely to be the result of a strong and persistent positive demand shock, or investment boom, that re-establishes the ‘divine coincidence’ of monetary policy. That is, the ability of central banks to stabilise inflation and output simultaneously,” she said.

RBA deputy governor leaves for green energy firm

In a surprise move, Guy Debelle has left his post as deputy governor of the Reserve Bank of Australia (RBA) to join a green energy firm. He will become chief financial officer of Fortescue Future Industries (FFI) in June.

Debelle had been seen by many as a frontrunner to be the next RBA governor. He has been vocal in warning about the risks posed to Australia’s economy if it was too slow to decarbonise.

He told the Australian Financial Review that his decision was based on a commitment to help business and humanity navigate what he says is the “existential problem” of climate change.

“Australia has a great opportunity to be a major player as a clean energy exporter, and decarbonisation is exactly what FFI is about,” he said.

Taskforce on Nature-related Financial Disclosures releases draft framework

The Taskforce on Nature-related Financial Disclosures (TNFD) is seeking feedback on a draft framework for the assessment and disclosure of nature-related risks.

The initiative was first announced last year, and is intended to replicate the success of the Taskforce on Climate-related Financial Disclosures (TCFD). It says its overall aim is to shift global financial flows towards nature-positive outcomes.

The draft framework includes an outline of fundamental concepts and definitions that the TNFD recommends for market participants to use when discussing nature-related risks and opportunities.

For example, it describes how organisations have dependencies on ecosystem services such as a clean and regular water supply. They also have impacts on those ecosystems through their activities, which may affect the services on which they depend.

“Today’s nature impacts can create tomorrow’s nature-related risks and opportunities,” says the document.

The TFND is seeking feedback via an online platform, and hopes to finalise the framework by the autumn of 2023.

This page was last updated March 20, 2022

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