Work by the European Central Bank to improve the sustainability of its monetary policy has put Eurosystem central banks at the top of the 2022 Green Central Banking Scorecard, published today. France has maintained its top position and is joined by Germany and Italy in the top three, while the ECB maintains fourth place. In contrast, Brazil, China, India and the US have all fallen in the rankings compared to the 2021 edition.
Published by Positive Money and Green Central Banking, the scorecard ranks G20 central banks and prudential regulators based on how they incorporate climate and environmental considerations, assessed across four areas: research and advocacy, monetary policy, financial regulation, and in-house operations. Since some countries separate central banks from financial regulation, it covers countries rather than institutions. The monetary policy and financial regulation scores of Eurosystem central banks are also influenced by the ECB’s score.
In this year’s rankings, eurozone members Germany and Italy benefited from ECB moves towards decarbonising its corporate asset purchase programme and collateral framework, with each rising four places. They replace Brazil and China which are now in joint sixth place, as a result of the slow implementation of Banco Central do Brasil’s climate commitments and an increase in financial support for coal projects by the People’s Bank of China.
The UK held on to its fifth place position as a result of climate-related financial regulation and disclosure requirements, but failed to keep pace with the ECB on greening monetary policy. The US fell two places, with no sign of meaningful movement on climate-related monetary and financial policy.
Almost all G20 countries have now achieved full marks in research and advocacy and 19 out of the 20 central banks assessed are now members of the Network for Greening the Financial System. However, despite fossil fuels driving price and financial instability, central banks’ climate research is not being translated into action, the report says.
The authors also argue that the extreme weather events and fossil fuel inflation experienced this year demonstrate ways in which the environmental crisis “can undermine the basic conditions for price and financial stability and jeopardise central banks’ ability to fulfil their core mandates”. It also warns that interest rate rises risk choking off capital-intensive green investments, but do little to combat supply-side inflation.
“Central banks are shooting themselves in the foot by attempting to curb short-term inflation without accounting for the climate crisis,” said Nikki Eames, Positive Money economist and lead author of the report. “Volatile fossil fuel prices and extreme weather events this year should be enough to convince central banks and regulators that supporting the net-zero transition is a central pillar of their core mandates for price and financial stability.”
This page was last updated November 22, 2022
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