- Climate change: Central Banking focus report is online
Climate change: Central Banking focus report is online
Climate change: Central Banking focus report is online, Wednesday 26 June 2019
ESG, Research / Market
The calm before the storm - The climate change 2019 survey
As climate-related risks to the financial sector become increasingly understood, central banks are demonstrating their willingness to develop capabilities to analyse the impact and modify their policies. A new survey, made in partnership with Amundi, indicates a watershed for central banks that could profoundly transform policies over the coming years.
The survey questionnaire was sent to 100 central banks in March 2019. By the middle of April, responses had been received from 34 central banks. The central banks responded on the condition of anonymity, and that neither the banks nor their officials would be cited in the report. Of these 34 respondents, 44% were from Europe and 41% were from emerging market economies. Almost all central banks that took part are from countries that have signed the Paris Agreement on climate change.
The main findings include the following statements:
- Central banks do not typically consider climate change a major risk to financial stability, although this is changing, notably among industrial countries.
- Climate change is clearly a concern for central banks – and a key concern for some – but not all consider it an issue they as institutions should directly act on.
- The insurance and banking sectors are the areas of the economy where central banks believe climate change will have an impact.
- Most central banks do not collect data directly related to climate change risk, but a growing number are assigning resources to this and developing capabilities.
- Stress testing risks derived from climate change is in its infancy among central banks. But this will likely change in the near future.
- Green assets are becoming increasingly attractive as an investment proposition for central banks, which regard green credentials as criteria that should be taken into consideration in reserve management.
- The use of environmental, social and governance (ESG) criteria in balance sheet management is the preserve of a minority of central banks.
- Central banks do not think they have the tools to promote green sectors. Many contend this is beyond their mandates.
- An overwhelming majority of central banks do not require commercial banks to disclose their climate-related risks.
- Central banks do not in the main think it necessary to add a specific section to their mandate in order to mitigate climate change risks, although a significant minority think a change should be made.
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Global Investment Views - December 2019
In recent weeks equities rallied along with bond yields as investors reacted to the prospect of a US-China ‘phase one deal’ and fading global recession fears. The value of negative yielding bonds continued to fall, from US$17 trillion over the summer to the current US$12.5 trillion. While equities were previously overshadowed by the excessive gloominess on the global economy and earnings, markets rebounded after corporate results in the US and Europe met or exceeded low expectations, and as economic data did not show any material worsening. The mantra now seems to be ‘not so bad is the new good’.
Global Investment Views - August 2019