The involvement of central banks in the climate wars deepens:
The Financial Times:
The world’s biggest central banks have identified nine ways in which they could use monetary policy to tackle the risks of climate change, including greener asset purchases and climate-related
lending schemes, according to a new report.
The options were outlined by the Network for Greening the Financial System [NGFS], a group of 89 central banks and financial supervisors formed to support the Paris climate goals, in research published on Wednesday.
It advises central bankers on how to shield themselves from climate change risks and support their national governments’ green policies without diluting their main monetary policy
tools. Each option was evaluated for its effectiveness in tackling climate risk and its impact on monetary policy.
There are a few things to note in those three brief paragraphs. The first is the reference to “risk,” a word that is being made to do a lot of work as central banks (and other financial
regulators) try to justify the expansion of their reach into climate-related regulation. The second and the third are the references to the use of “greener asset purchases and climate-related
lending schemes,” something that would appear to suggest that the current involvement by many central banks in the capital-allocation process will not just be confined to what many
of them are now doing with interest rates. Last time I looked, central planning and capital allocation make for an unhappy combo.
I also note the reference to supporting “national governments’ green policies.” While it is appropriate in a democracy that green policies be decided at the governmental (if that means
legislative) level, I cannot help wondering how easily this approach can be squared, in those jurisdictions where that is the rule, with central-bank independence.
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March 27, 2021
