NGFS calls for action by central banks

The Network for Greening the Financial System collectively acknowledges that climate-related risks are a source of financial risk. Some members have extended this analysis to broader environmental risks finding that these are a source of financial risk as well. The members of the NGFS therefore call for collective action and have issued recommendations which have today been published in its first comprehensive report. Taken together, these recommendations reflect the best practices identified by NGFS members to facilitate the role of the financial sector in achieving the objectives of the Paris agreement.

Frank Elderson, chairman of the NGFS: “The financial risks we face through climate change are analytically difficult, unprecedented and yet very urgent. By issuing these recommendations, the NGFS members demonstrate collective leadership which will result in action to foster a greener financial system across countries and continents. As long as the temperatures and sea levels continue to rise and with them the climate-related financial risks, central banks, supervisors and financial institutions will continue to raise the bar to address these risks and to green the financial system.”

There is still a significant amount of analytical work to be done in order to equip central banks and supervisors with appropriate tools and methodologies to identify, quantify and mitigate climate risks in the financial system. Therefore, over the next year, the NGFS has decided to prepare a number of technical documents, on (i) climate and environment-related risk management for supervisory authorities and financial institutions, (ii) scenario-based climate risk analysis and (iii) incorporating sustainability criteria into central banks’ portfolio management. To discuss the report and next steps, NGFS members gathered on Tuesday 16 April at Banque de France in Paris for a NGFS Plenary meeting and today for a high level conference.

Today, three new institutions joined the NGFS: the Swiss National Bank and Swiss Financial Market Supervisory Authority (FINMA) joined as members while the European Investment Bank joined as an observer. This will boost total membership of the NGFS up from 34 members and 5 observers to 36 members and 6 observers. The NGFS is growing at a fast pace: ten members have joined since December 2018: Banca d’Italia, Bank of Canada, Bank of Greece, Bank of Thailand, Central Bank of Hungary, Central Bank of Ireland, Danmarks Nationalbank, the European Insurance and Occupational Pensions Authority (EIOPA), Finanstilsynet (FSA of Norway) and Superintendencia Financiera de Colombia (FSA of Colombia).