Press release

Paris, November 22, 2022 – Positive Money and its partners, including Reclaim Finance, have published the Green Central Banking Scorecard 2022, which ranks G20 central banks according to their environmental practices. This ranking reveals that central banks are still struggling to take action on the climate issue, and even more so to use their monetary policies as a lever for action against climate changes. Even the best-rated banks, including the Banque de France and other Eurosystem banks, are failing to support the ecological transition. NGOs call on central banks to break with this wait-and-see attitude to respond to the inflationary and climate crisis. 

This ranking, published for the first time in March 2021 and updated in October 2021, comes at a time when action by central banks in the face of galloping inflation caused by fossil fuel dependency is at the heart of the economic and financial world’s concerns. To overcome the current crisis, more and more voices are being raised to emphasize that the energy transition and the fight against climate change are essential if Central Banks are to deliver on their mission of price stability (2).

Yet the new edition of the ranking highlights the failure of Central Banks to make progress on the climate issue and – even more so – to support the transition. While 17 of the 20 banks evaluated reach the maximum score in the research and advocacy category (3), only one bank exceeds the average on all criteria (4).

Nikki Eames, Positive Money economist and lead author of the report, says: “By trying to curb inflation in the short term without addressing the climate crisis, Central Banks are shooting themselves in the foot. The volatility of fossil fuel prices and this year’s extreme weather events should be enough to convince them that supporting the transition to carbon neutrality is a central pillar of their missions to maintain price and financial system stability.”

No Central Bank is making full use of its main lever: monetary policy. On the contrary, more than half of the banks have a score of almost zero on this criterion (5) and only the Brazilian central bank exceeds 25% of the points. Unlike the Chinese and Japanese Central Banks (6), the Eurosystem banks that occupy the top places in the ranking have  not implemented any measures to support the European transition (7).

Paul Schreiber, Campaigner at Reclaim Finance and contributor to the report, points out: “On the one hand, the ECB and the Banque de France recognize that the energy transition contributes to price stability. On the other hand, they are not taking any measures to promote this transition, or even to protect it from the effects of successive rate hikes that increase costs (8). With two days to go before the Day against Fuel Poverty, which affects 12 million people in France (9), it is time for the Banque de France to assume its leadership role by asking the ECB to support European energy efficient building renovation.”

The improvement in the scores of some Central Banks, and the score of the Eurosystem leadership is due to the adoption of tools to manage the financial risks linked to climate change and the greater integration of these tools into the supervision of financial institutions.. Despite this relative progress, strong disparities persist, with only six central banks exceeding the average (10).

Beyond monetary and prudential policy, some central banks are gaining a few points by taking measures that have a limited financial impact but which reflecting a desire to set an example. This is notably the case of the Banque de France, which outperforms its Eurosystem colleagues thanks to a demanding investment policy (11), and not thanks to more ambitious monetary and prudential proposals.

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Notes:

  1. See the summary of the Green Central Banking Scorecard 2022 report.
  2. See in particular the Reclaim Finance report and the ECB article.
  3. The research and advocacy category reflects the efforts made by Central Banks to study climate change and to raise awareness of its impacts in the financial and political world.
  4. The Banque de France scores 70 out of 130 points, or 54%.
  5. 12 G20 Central Banks scored between 0 and 2 points out of 50 on the monetary policy criterion.
  6. Japan and China have green lending programs geared towards decarbonization of the economy. However, the monetary policy score for these institutions has been reduced and does not exceed that of the Eurosystem banks because: (i) the Japanese Central Bank still buys fossil fuel assets and allows them to be used as collateral by financial institutions; (ii) the People’s Bank of China has largely supported the coal industry via specific operations.
  7. The points obtained by the Eurosystem banks on the monetary criterion are explained by a reduction in the carbon footprint of monetary activities, and not by operations specifically aimed at promoting the transition. Moreover, this reduction remains insufficient.
  8. See the analysis of Reclaim Finance.
  9. See the website of the Day against Fuel Poverty.
  10. The four European central banks included in the ranking, the United Kingdom and China exceed the average on the prudential criterion (“Financial Policy”).
  11. The Banque de France has notably aligned its investment portfolios with a 1.5°C trajectory, excluded companies heavily involved in fossil fuels, and taken a position against the development of new fossil fuel production projects. As a report by Reclaim Finance has highlighted, it has the best investment policy of the G20 banks.