World - The World’s Central Banks Doing Very Little To Head Off Climate Disaster
Central banks have extremely powerful tools to shape the global financial system, and could steer capital flows out of fossil fuels and into cleaner energy.
But to date, most central banks have “tinkered at the edges,” and in many cases, “positively reinforced fossil fuel financing,” according to a new report. Global calls for central banks to take on a more active and constructive role in the fight against climate change are growing louder.
Very little action amid claims of “neutrality”
The primary remit of the U.S. Federal Reserve and a long line of other central banks is to ensure macroeconomic stability in the financial system. However, the banks largely claim that helping the world slash greenhouse gas emissions and prevent the worst of climate chaos is outside of their mandates.
Unchecked climate change presents catastrophic risk to the financial system.
But to “the extent that central banks’ mandates require them to preserve financial stability, they must therefore address these climate-related risks,” a report from Oil Change International states. After all, unchecked climate change presents catastrophic risk to the financial system.
However, so far, efforts from central banks are narrowly focused on increasing disclosures and transparency, and have done very little even as the risks continue to mount.
Oil Change International looked at 10 criteria to grade how central banks are addressing climate change in the years since the 2015 Paris Climate Agreement. For example, whether or not they have excluded fossil fuels from Covid-19 related asset purchases, or whether central banks use the variety of tools and regulatory authorities over commercial banks to pressure them into steering lending away from oil, gas, and coal. They also have many policy and research tools, including disclosure requirements and developing taxonomies and parameters for sustainable investments.
Not only do most of the 12 largest central banks grade poorly, but many continue to reinforce the existing fossil fuel financial arrangements. For instance, the People’s Bank of China continues to promote financial flows to coal. Germany’s Bundesbank supports “market neutrality” as a justification for refraining from supporting climate action, but “neutrality” means continuing to support fossil fuels. The U.S. Federal Reserve has paid some lip service to climate risk, but has done little.
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