By Robin Hamaker-Taylor
The central bank Network for Greening the Financial System (NGFS) has recently enjoyed continued momentum with the development of several new reports and the addition of new members.
In July this year, the NGFS published a technical supplement “Macroeconomics and Financial Stability: Implications of Climate Change” to the April 2019 NGFS Comprehensive report. The supplement provides an overview of existing approaches for quantitatively assessing climate-related risks and identifies key areas for further research. It also sets out a menu of options for central banks and supervisors to assess the risks.
This month (October 2019) the group also published “A Sustainable and Responsible Investment Guide for Central Banks’ Portfolio Management”. The guide, aimed at central banks that wish to adopt Sustainable and Responsible Investment (SRI) practices, builds on the results of a recent survey of NGFS members. It includes case studies of first-hand experiences by some NGFS members and identifies common SRI strategies. The most prominent SRI strategies are green bond investments and negative screening for equity and corporate bond holdings.
Adding four new members and an observer in September 2019, the network has now 46 members and 9 observers, representing five continents, over half of global greenhouse gas emissions and the supervision of two thirds of the global systemically-important banks and insurers.
Also, worth noting is the recent invitation of NGFS to a roundtable session of US Senate Democrats’ Special Committee on the Climate Crisis. At Capitol Hill in Washington, D.C., Frank Elderson, chair of the NGFS and executive director of De Nederlandsche Bank, gave an opening statement followed by the other NGFS delegates.
Going forward, the NGFS plans to publish additional technical documents to better equip central banks and supervisors with appropriate tools and methodologies to identify, quantify and mitigate climate risks in the financial system. This will include publishing further details on the NGFS transition scenarios and guidelines on scenario-based climate risk analysis.
Launched at the Paris One Planet Summit on 12 December 2017, the NGFS is a group of Central Banks and Supervisors. The network shares best practices amongst themselves and contributes to the development of environment and climate risk management in the financial sector and to mobilise mainstream finance to support the transition toward a sustainable economy.