Climate Risk Dispute Ignites Passionate Argument at FSB Over American Viewpoint
In a world increasingly grappling with the challenges of climate change, central banks and financial institutions are stepping up to the plate. Here's a roundup of recent developments in this evolving landscape.
The Monetary Authority of Singapore (MAS) has emphasised the growing importance of green finance in strengthening economic ties between China and ASEAN. Leong Sing Chiong, MAS's deputy managing director, stated that both regions require "vast amounts of green financing and investments to transition their economies towards a sustainable, low carbon future."
Across the globe, the Network for Greening the Financial System (NGFS) is playing a pivotal role. New research from the Vienna School of International Studies has revealed that international "peer pressure" and governmental climate policies are key factors determining how much central banks discuss green issues publicly.
The SEC's withdrawal from the NGFS marks the end of a major regulatory initiative aimed at combating greenwashing. The Securities and Exchange Commission (SEC) withdrew proposed rules requiring enhanced ESG disclosures from investment advisers and fund managers. This move follows mounting Republican pressure, with interim undersecretary Michael Kaplan insisting that climate should only be an FSB focus if there is proof of imminent financial stability risk.
However, the European Central Bank (ECB) has no plans to withdraw from the NGFS or scale back its climate work. The ECB's head of climate policy, Irene Heemskerk, has stated that Europe's climate risk regulations will not be derailed by the Trump administration's opposition to ESG policies.
Meanwhile, the ECB sees climate and environmental risk as relevant for banks to manage. Heemskerk made this clear, urging environmental politics scholars to explore the emerging nexus between climate change and inflation. In a new paper, James Jackson, Hallsworth Research Fellow at the University of Manchester, considers the concepts of fossilflation and climateflation, as well as the price pressures from natural disasters and extreme weather.
The Climate Finance Reform Compass, launched by the Climate Policy Initiative, is an interactive tool designed to bring structure and accountability to the fragmented climate finance landscape. The tool monitors 32 topics across nine themes, including the New Collective Quantified Goal on climate finance and multilateral development bank reforms.
Lastly, the anti-greenwashing rule, first proposed in May 2022, was designed to address a lack of consistent ESG data. The rule aims to ensure that financial institutions provide accurate and transparent information about their environmental, social, and governance practices.
These developments underscore the growing recognition of climate change as a critical issue for central banks and financial institutions worldwide. As the world continues to grapple with the impacts of climate change, it's clear that green finance will play a crucial role in shaping our economic future.
