Scaling up Green Finance: What Next?
Dr. Sabine Mauderer, Member of the Executive Board of the Deutsche Bundesbank, recently gave a speech on the role central banks, policymakers and standardisation have to play in scaling up green finance.
Mauderer discussed the work of the Central Banks and Supervisors Network on Greening the Financial System (NGFS). The NGFS’s key message is that climate change is a source of financial risk, and so banks need to play a role in promoting green finance. Central banks have always been catalysts for market growth, building a stable investment landscape by maintaining reliable standards and transparency – and this should also be the case for green finance.
The NGFS’s first comprehensive report, published in April, put forward six practical recommendations for central banks, supervisors and policymakers. For banks, they recommend that climate-related risk is integrated into financial stability monitoring and the bank’s own portfolio management, as well as making relevant data publicly available and building understanding of how climate-change translates into financial risk. For policymakers, the recommendations include achieving robust and internationally consistent climate and environment-related disclosure to ensure investors are aware of climate risks. Part of this is supporting the development of a comprehensive taxonomy to prevent green washing, facilitate comparison and build transparency.
An important message here – for markets to transition to be more sustainable – reliable, consistent and comparable data on the climate-related risks of investments and entities is essential. To gather useful, transparent data, there needs to be a taxonomy for climate-related disclosure to ensure information is standardised across countries and companies.
Read Dr. Sabine Maudere’s speech, given at the Social Bond Principles Annual General Meeting and Conference, Frankfurt, in full here.