Viewing climate-related losses that have risen up to 160 billion dollars from 2018 alone, insurers, including 30 central banks, have called for measures to enhance green finance and better assessments of risks from increasing global temperature. For this purpose, a report has been prepared by the banks, which participated in the Central Banks and Supervisors Network for Greening the Financial System (NGFS) based on work, done in the past few years by the governor of Bank of England and the governor of the Bank of France.
As per a news report published on April 17, 2019, the Bank of France, Bank of England, and the People’s Bank of China led the move and drew the group deeper into the controversial area of policymaking. They advocate funding for the alternatives of fossil fuels. However, the US Federal Reserve and Bank do Brasil did not involve themselves in the initiative as they are doubtful about climate science in spite of the increasingly pressing need.
Why the Move The call for measures to push finance is aimed at:
(i) building awareness about the losses as global temperature increases, making weather less predictable and storms, more powerful;
(ii) encouraging funding for greener projects to cut emissions and make renewables more comfortable; and
(iii) inspiring central banks and supervisors to take necessary measures to foster a greener financial system.
Recommendations The recommendations of the report prepared by the banks are as follows:
* Injecting climate-related risks into the monitoring of broader financial stability and threats to the banking system
* Using sustainability criteria to shape the portfolios of assets maintained by central banks
* Identifying areas where more data is needed to describe threat coming from environmental issues
* Prodding financial market participants to better disclose climate-related risks, an effort that builds on the group of 20 nations Task Force for Climate-related Financial Disclosure, (TCFD).
* Developing a taxonomy of economic activities or a common vocabulary for policy-makers and companies to use in assessing climate-related impact on finance
Green Finance
Green finance refers to any financial instrument or investment, issued under contract to a firm, facility, person, project or agency—public or private—in exchange for the delivery of positive environmental externalities that are real, verified, and additional to business to create transferable property rights, recognised within regional, international, national, and sub-national legal frameworks.
It is any market-based investing or lending programme that factors environmental impact into risk assessment or utilises environmental incentives to derive business decisions.