Green mandate proposed for Chile’s central bank

A proposed green mandate for Banco Central de Chile, the BoJ releases its TCFD-aligned disclosure, Lagarde on greenflation, Green Swan 2022 and more from this week in green central banking.

Green mandate proposed for Chilean central bank

A Chilean constitutional convention has adopted draft provisions to change the Banco Central de Chile’s (BCC) mandate, requiring it to consider “care of the environment and nature” in its activities.

This expansion of the central bank’s mandate is one of eight articles referring to the BCC, with other provisions adding a responsibility to “contribute to the welfare of the population” and to protect employment. The product of 10 months of negotiations, the draft of a new constitution will now go to a committee for final editing before being put to a public referendum for ratification in September.

SEC proposes new ESG disclosure rules

In an effort to combat greenwashing, the US Securities and Exchange Commission has proposed new rules governing environmental, social and governance (ESG) disclosures. The proposals would require investment advisers and companies to provide additional information in fund prospectuses, annual reports and adviser brochures, based on the ESG strategies they employ.

Funds marketed as environmental would have to disclose greenhouse gas emissions associated with their portfolio investments, while those claiming to achieve a specific ESG impact would be required to describe that impact and summarise their progress on achieving it. Other provisions relate to the use of proxy voting in implementing ESG strategies.

The proposed new rules are now open to a public consultation that will close at the end of July.

Greenwashing may be rising fast, warns ECB

There is no clear evidence of EU financial institutions reducing their climate-related risks, the European Central Bank (ECB) has warned in a supplement to its latest financial stability review. However, greenwashing in both the green bond market and investment fund sector may be rising fast, according to the report, requiring regulatory standards on sustainable financial instruments.

The analysis also details how exposure concentration, cross-hazard correlation and institutions’ overlapping portfolios act as amplifiers of climate risks, calling for “further reflection on how to close any material gaps in the prudential framework”.

The document concludes by saying that the ECB is now focusing on the extent to which systemic risk buffers and other existing macroprudential tools could be used to capture climate-related risks, and that new tools, including concentration risk measures, may also be needed to address these risks from a systemic perspective.

Ukraine war could speed up green transition, says Lagarde

The war in Ukraine is likely to speed up the green transition, ECB president Christine Lagarde has said in a blog post on monetary policy normalisation in the euro area. EU efforts to reduce dependence on Russian fossil fuels could keep up pressure on energy prices, she said, while growing demand for alternatives is putting pressure on the price of rare metals and minerals.

Green technologies will account for most of the increase in demand for metals and minerals in the foreseeable future, Lagarde added, contributing to higher inflation expectations. “The faster and more urgent the shift to a greener economy becomes, the more expensive it may be in the short run.”

BoJ releases climate-related disclosure

CO2 emissions associated with the Bank of Japan’s (BoJ) business operations have fallen dramatically in recent years, according to the central bank’s climate-related disclosure.

Released as part of its annual business report, the report shows that direct emissions from the BoJ’s head office, branches and local offices fell from a peak of 40,497 tonnes in 2018 to 27,987 tonnes in 2020, helped by disruption associated with Covid-19. Data for 2021 will be released later this summer.

The disclosure, aligned with TCFD recommendations, includes a review of measures the BoJ is taking to mitigate climate change across five areas: monetary policy, the financial system, research, international finance, and business operations and external communication.

Fed role on climate limited, says supervision nominee

The latest nominee for vice-chair for supervision at the US Federal Reserve has said the central bank’s ability to help in the transition to net zero is “quite limited”.

Michael Barr told a Senate banking committee nomination hearing that the Fed should not allocate credit or tell financial institutions to lend to a particular sector. Instead, it should confine its climate change response to assessing climate-related risks to the financial system and working with financial institutions to manage those risks.

Barr’s are in stark contrast to those of Sarah Bloom Raskin, President Biden’s previous nominee for the position. A strong advocate of integrating climate risks into banking supervision, Raskin withdrew her nomination in the face of strong opposition from Republican senators and oil and gas lobbyists.

Green Swan Conference begins on Tuesday

The second annual Green Swan Conference will begin on Tuesday 31 May, focusing on the themes of monetary policy in the context of climate change and the role of finance in the climate transition. The two-day virtual event will feature a high-level panel discussion between People’s Bank of China governor Yi Gang and ECB president Christine Lagarde, as well as contributions from central bankers from around the world.

Beginning at 9.30am CEST, the conference will be fully livestreamed and will be covered by Green Central Banking in a live blog.