The Network for Greening the Financial System (NGFS) has released a comprehensive report advocating for central banks worldwide to incorporate sustainability considerations into their portfolio management strategies.
According to ESG Investor, the report, consisting of a cover report and two technical documents, offers essential insights and recommendations aimed at fostering sustainable and responsible investment (SRI) practices within central banking institutions.
In the cover report, the NGFS outlines ten pivotal recommendations designed to enhance central banks’ understanding of SRI policies and elevate their related practices. These recommendations encompass various aspects, including the integration of sustainability considerations into governance frameworks and methodologies for assessing exposures to sustainability-related risks.
The first technical document delves into the integration of net-zero considerations into central banks’ investments in equity and corporate bonds. It addresses the challenges inherent in implementing such strategies while emphasizing the importance of aligning investment decisions with sustainability goals.
In the second technical document, the NGFS presents an overview of available metrics that can inform central banks’ strategies for identifying and addressing climate-related risks. It provides guidance on how central banks can assess climate-related risks, opportunities, and impacts on their sovereign holdings, facilitating informed decision-making in portfolio management.
Sabine Mauderer, Chair of the NGFS, underscored the urgency for central banks to recognize and mitigate the risks posed by climate change to their balance sheets. Mauderer highlighted the significance of aligning portfolios with SRI practices as a means to address this challenge. While acknowledging the progress made by central banks in adopting SRI practices, Mauderer emphasized the need for further implementation efforts to effectively manage climate-related risks.
“Central banks ought to understand and respond to the risks that climate change poses to the integrity of their balance sheets,” said NGFS Chair Sabine Mauderer. “Aligning our own portfolios with SRI practices can help us to meet this challenge. Central banks across the world are adopting SRI practices – which is laudable – but many are still at the early stage of implementation.”
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