Central banks need to walk the talk on increasing transparency and publicly disclosing the financial implications of climate change (Financial Times, 15 May 2018).
At the end of 2015, the Financial Stability Board highlighted the urgent need for greater transparency on climate risks and put climate change firmly on the agenda establishing the Task Force on Climate-related Financial Disclosures. Just over two years later, central banks and financial regulators have laudably convened to produce a work plan on how to green the financial system. We are calling on them and their peers to lead by example by disclosing the climate risks and financial implications of climate change on their own balance sheets.
The governor of the Bank of England, Mark Carney, has suggested that the severity of climate risks to financial stability could result in a “climate Minsky moment”, involving a rapid, system-wide downward repricing of assets. He has also highlighted that climate risks and opportunities are currently “shrouded in secrecy”, and the more transparent we make markets “the more we will all benefit”.
It seems sensible that central banks take the lead in transparently reporting climate-related financial disclosures. Such action is further warranted in view of the number of central banks that have taken an interventionist role in the economy, building up portfolios of government and corporate securities via quantitative easing. Evidence from the UK and eurozone suggests that these portfolios are highly skewed towards carbon intensive sectors.
As central banks are public institutions, with losses on their balance sheets often indemnified by taxpayers, there is a particular onus on them to walk the talk. Greater transparency and disclosure is thus not only imperative to ensure coherence with their public statements, but also a duty to society, which central banks are ultimately accountable to.
Better Europe Public Affairs
Conseil Scientifique de la Fondation pour la Nature et L’Homme
Climate Strategy and Partners
Corporate Europe Observatory
Debt Resistance UK
Next Systems Project - Democracy Collaborative
European Environment Bureau
European initiative for a Finance-Climate Pact
Finance Innovation Lab
Friends of the Earth England, Wales and Northern Ireland
Friends of the Earth Europe
Global Justice Now
Global Forest Coalition
Global Sustainability Institute, Anglia Ruskin University
Green Budget Europe
Green Economy Coalition
International Institute for Law and the Environment
International Trade Union Confederation
Jubilee Debt Foundation
Leave it in the Ground Initiative (LINGO)
New Economics Foundation
NOAH - Friends of the Earth Denmark
Notre affaire à tous
Positive Money (UK)
Positive Money (EZ)
Royal Society for the encouragement of Arts, Manufactures and Commerce
Social Value UK
Stamp Out Poverty
Transparency Task Force
World Future Council