The Green Central Banking Scorecard, produced by Positive Money and Green Central Banking, scores and ranks the full range of green policies and initiatives adopted by G20 central banks. The analysis is based on a literature review, expert consultations, and bilateral interactions with central bankers and supervisors.
Central banks and financial supervisors have a duty to incorporate environmental considerations into their policymaking. Failing to do so jeopardises their ability to fulfill their mandates and reduces our chances of tackling climate and ecological breakdown. Increased risk of pandemics like COVID-19, generated by our global economic system’s destruction of nature, strengthens the case for action.
The report – Green Central Banking Scorecard
The report – Green Central Banking Scorecard – issued by Positive Money reviews the full range of policies and initiatives that an ideal green central bank would adopt across four categories: Research and Advocacy, Monetary Policy, Financial Policy, and Leading by Example.
Based on this literature review, expert consultation, and bilateral interactions with central bankers and supervisors, Positive Money developped a system to score and rank G20 countries on the green policies and initiatives of their monetary and prudential authorities.
The results, displayed as green central bank ‘scorecard’ below, show that actions are failing to match up with words, as the vast majority of countries score full marks in Research and Advocacy while performing poorly across the other three categories. While some institutions have taken concrete action to assess environmental risks and incentivise green investments, all are shying away from policies that disincentivise or restrict financial flows to environmentally harmful activities.
Positive Money identifies the alignment of monetary and financial policies with environmental targets as key priorities moving forward. High impact policies that would achieve this include the exclusion of fossil fuels from asset purchase programmes and collateral frameworks, and the adjustment of prudential tools such as risk weights to effectively integrate the risk of high-carbon lending.
Key developments since the previous edition include:
- While some central banks have made progress, none are responding in any meaningful way to the radical uncertainty climate and ecological crisis brings. Even the highest scorers failed to rise above a C grade.
- France claimed the top spot, largely due to the Banque de France’s responsible investment charter, which includes a phased withdrawal from fossil fuel investments.
- China slipped from first place due to credit guidance favouring domestic coal production. However, PBoC’s recent credit guidance on limiting overseas coal investments is acknowledged, and keeps China at number three.
- The position of the EU improved slightly, overtaking the UK, thanks to the European Central Bank’s climate action plan, and consideration of climate capital rules and bank portfolio restrictions. These moves also benefited France, as well as Italy and Germany.
- Despite some action on addressing climate risk, a lack of significant policy changes from the Federal Reserve means the US slid down to joint 14th place.
Green Central Banking Scorecard report is available here.
Source: Positive Money – Green Central Banking Scorecard