The article “Covid-19 first, climate later? It’s not so simple – Links between health risks and environmental risks”, published by Banque de France on April 15, 2020, examines the link between Covid-19 and the climate crisis. It concludes that: “the transformation of our socio-economic system toward carbon neutrality in 2050 should be integrated starting now into recovery plans designed to face the current crisis”.

Reclaim Finance concurs with this analysis and calls for the adoption of a precautionary approach centered around the fight against climate change. This requires organizing the phase out of fossil fuels, and the immediate exclusion of the most polluting companies from monetary and regulatory responses to the crisis.

Banque de France notes that:

Covid-19 and climate risks have shared origins: the widespread deterioration of our natural environment”. In this respect, “while their impacts are unpredictable, their occurrence is increasingly predictable”.

This sentence summarizes everything: a precautionary approach must be adopted, and risks must be reduced beforehand instead of simply managing consequences.

  • Banque de France indicates that traditional financial risk models and economy-climate models are unable to integrate risks linked to climate change.
  • And responding to these risks with a monetary and budgetary policy once they become a crisis is particularly complex as these risks materialize in the form of supply and demand shock.
  • Banque de France therefore concludes that it is not possible to protect against these climate risks without designing the world “after”, and transforming the system in its entirety to “ensure the provision of global public goods such as health and climate stability”.

In this context, the analysis of Banque de France recognizes the need for green recovery plans and the important role of central banks. It concludes:

It may seem tempting to resolve the Covid-19 crisis first and deal with the climate crisis later. This would be a double mistake; firstly, the analogy between these two crises is relevant and shows that delaying the response to the climate crisis exposes us to new, even more serious crises than the current one; thus, we have seen that these two crises are linked , both with their shared origin (widespread destruction of ecosystems) and their mutual reinforcement in the event of worsening climate change. This means that transforming our socioeconomic system into one that is carbon neutral by 2050 should be integrated immediately into our recovery plans.”

Among the potential measures that could be taken, Banque de France mentions the inclusion of ESG criteria into the portfolios of central banks, the establishment of a green monetary, regulatory, and fiscal policy, and – even – reforming the international monetary and financial system to orient it towards recognizing climate stability as a public good.

Reclaim Finance supports all these measures. They now need to be implemented. For Reclaim Finance, two of the first measures to carry out should be the reinforcement of Banque of France’s divestment policy and a European decision to exclude carbon, petrol, and unconventional gas from monetary and regulatory responses to the crisis.

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