France, Germany, Italy and the EU must close gaps in monetary policy to advance further on climate<\/em><\/p>\n<\/div> Copublished with Positive Money<\/p>\n<\/div> 26th September 2024 – The European Central Bank (ECB) has ranked fourth behind three of its member states in the Green Central Banking Scorecard, a project from think tank Positive Money, with Reclaim Finance\u2019s support, which ranks G20 central banks on their action to green the financial system.<\/p>\n<\/div> Started in early 2021, the scorecard began as a means of kickstarting a \u201crace to the top\u201d on climate action between the world\u2019s biggest central banks, and there have been significant movements in the rankings since then.<\/p>\n Policies introduced by the ECB have bolstered both its own score and those scores of France, Germany and Italy, with these central banks all scoring particularly high in the financial policy category, due to policies such as the ECB\u2019s setting deadlines for banks to meet its supervisory expectations for managing climate-related and environmental risks by the end of 2024.<\/p>\n The various green policies implemented by the individual central banks of those EU member countries, such as the Banque de France having formally committed to excluding some fossil fuels from its non-monetary portfolios, have then boosted each of their scores separately.<\/p>\n Notable in this year\u2019s scorecard is the gap emerging between the leaders and laggards on climate work. Brazil is the only other country alongside those in the EU to score a B grade, and there are many countries which have failed to make progress since the previous edition, falling in the rankings relative to their peers. These include several countries with historically high carbon emissions, like the UK, the US and Canada.<\/p>\n However, Positive Money argues that even among the top performers, there are substantial gaps in the adoption of the kinds of high-impact actions needed to steer financial systems away from carbon-intensive activities and toward sustainable alternatives. As an example, the authors claim there is still a noticeable reluctance from institutions to abandon the outdated notion of prioritising market neutrality across their operations, which perpetuates investments in environmentally harmful assets and benefits.<\/p>\n Furthermore, despite their high ranking, European central banks continue to underperform on monetary policy, making limited progress in that category since the last scorecard. Indeed, the past year was marked by a pause in the \u2018tilting\u2019 of asset purchases and the abandonment of the key measure to green collateral framework. At the same time, the ECB has not moved toward green refinancing operations to support key activities such as renewable energy deployment.<\/p>\n Some of the most significant changes to the Green Central Banking Scorecard\u2019s rankings include the UK falling from 5th to 7th place, Brazil breaking into the top five, and the US falling from 16th to 17th place, now ahead of only Turkey, Argentina and Saudi Arabia.<\/p>\n<\/div><\/div><\/div> European nations are among the highest emitters historically, and these countries\u2019 central banks and financial supervisors have a responsibility to make relatively fast progress towards decarbonising their activities.<\/em><\/p>\n \u201cUnfortunately, what we\u2019re seeing is a chasm opening up between Europe and the rest of the G20. Some of those that have fallen behind have less capacity to address climate change due to imbalances in the structure of the global financial and monetary system.<\/em><\/p>\n \u201cNow that they\u2019ve made progress in greening their financial supervision, European central banks should turn their attention to gaps in monetary policy, and also use the resources at their disposal to support those countries with the least responsibility for climate change, who are already feeling the worst impacts of it. They should additionally use their position of international influence to call on central banks in other rich nations, like the UK and the US, to follow their lead and accelerate their climate work.<\/em><\/p>\n<\/div> Positive <\/span>Money\u2019s<\/span> Zack Livingstone, lead <\/span>author<\/span> of the report<\/span><\/span><\/strong><\/p>\n<\/div><\/div><\/div> The Scorecard highlights a key paradox for the ECB and other European central banks. Despite recognizing the impact of climate change and encouraging others to address it, they are still failing to mobilize their most impactful tool: monetary policy. It is time for European central banks to ramp up their ambition and start actively supporting the green transition.<\/em><\/p>\n<\/div> Clarisse Murphy, campaigner at Reclaim Finance<\/strong><\/p>\n<\/div><\/div><\/div> Positive Money also points to improvements in the scorecard methodology which have strengthened the accuracy of scores in the new edition by better reflecting the impact of central banks and financial supervisors\u2019 climate actions – separating those taking concrete action to green their operations from those neglecting their responsibility to do so.<\/span>\u00a0<\/span><\/p>\n<\/div><\/div><\/div>