On June 24th 2020, the Network on Greening the Financial System (NGFS) published several documents, including a short position paper on climate change and monetary policy. If this document mostly gathers positions that are widely agreed upon NGFS members, it also encourages them to adopt a more “proactive” stance by opting for “concrete measures”. This discrete push is a first step toward real climate action. Now the NGFS needs to guide its members by putting forward key concrete measures that should be adopted.
On April 10th 2020, Reclaim Finance and 5 European NGOs sent a letter to the Network For Greening the Financial System (NGFS) to ask it to call for a “green recovery” to the Covid crisis and to push central banks to adopt concrete measure, starting with fossil fuel exclusions.
As statements from its chairman Frank Elderson and several of its members have shown in the past few months, the NGFS takes great care to maintain its “greening” agenda despite the crisis and was not insensitive to this call.
On June 8th, it published a statement on the need for a green recovery.
On June 24th, it released its “Initial takeways” on Central banks and climate change. The document gathers known and consensual elements about climate change and central banks. Mainly:
- Climate change have an important and increasing effect on the economy, and affects all areas with various time horizons.
- Climate change poses significant challenges for monetary policy as it affects its transmission channels.
- Modeling climate impact remains highly complex and central banks need to continue to develop their expertise and add climate risks to their assessments.
If none of this key “takeways” are really new, the NGFS also briefly mention “possible avenues for further work by central banks”. Among them, the NGFS indicates that “central banks that wish to pursue a more proactive policy stance could analyse the potential scope for concrete measures to foster climate change mitigation and adaptation, within each central bank’s mandate”.
This is a small, yet important, step: the NGFS admits that concrete measures are needed and that its work so far – regardless of how important and needed it may be – is not sufficient to cut GHG emissions.
Now, the NGFS needs to set a clear path for its members by defining key concrete measures. A good start would be to exclude assets from the most polluting companies from central banks’ list of collateral and asset purchase programs. Many financial actors already understand and accept these exclusions. Coal, unconventional oil and gas and the development of new fossil fuel projects should be the first assets to go.