UK (Commonwealth Union)_ Commonwealth Central Bank Governors convened on the sidelines of the World Bank and International Monetary Fund (IMF) meetings held in Marrakesh, Morocco. Their purpose was to deliberate on the pivotal role that central banks must play in enhancing climate resilience and mobilizing green finance. The meeting took place against the sobering backdrop of a recent earthquake in Morocco, which resulted in the tragic loss of almost 3,000 lives, underscoring the peril of exogenous shocks capable of devastating a nation’s infrastructure and economy. In light of Morocco’s commendable response to this crisis, the governors acknowledged the imperative need for comprehensive disaster preparedness and recovery plans not only within the Commonwealth but globally.
Presided over by Mr. Faizul Ariff Ali, Governor of the Reserve Bank of Fiji, the meeting centered on the theme, ‘Assessing the Role of Central Banks in Building Resilience to Climate Change.’ In recent years, the frequency and severity of climate change-related shocks have risen, presenting substantial economic risks on a global scale. This escalation in climate-induced threats has brought the role of central banks in addressing these challenges to the forefront. The Governors, during their discussions, explored a spectrum of approaches that central banks can undertake to combat climate change, encompassing green monetary policy, prudential regulation, and policy development.
A fundamental objective of the meeting was to emphasize strategies for aligning central banks’ actions with their primary missions of ensuring financial and price stability while concurrently advancing sustainability objectives. Commonwealth Secretary-General Rt Hon Patricia Scotland, addressing the Commonwealth Central Bank Governors Meeting, underscored the necessity and inevitability of central banks actively participating in the transition toward more sustainable economic models and policies. She elucidated that their involvement is essential for protecting financial systems against climate-induced instability, which is a natural consequence of climate change.
She further articulated that this endeavor offers an opportunity to drive economies away from fossil fuels and toward more sustainable practices by promoting green financing and cultivating resilience. In this way, central banks can ensure that economies not only survive but flourish in a world where sustainability is paramount. She stated, “Your active involvement in the transition to more sustainable economic models and policies is both necessary and inevitable because central banks have an essential duty to protect our financial systems in the face of instability, and instability is a natural consequence of climate change. It is also an opportunity because the only way to tackle climate change is to transition our economies away from fossil fuels and towards more sustainable practices. By promoting green financing and fostering resilience, central banks can ensure that our economies not only survive but thrive in a world where sustainability is paramount.”
The Commonwealth Central Bank Governors Meeting served as a platform for meaningful dialogue on these pressing issues. The discussion was framed by a paper from the Commonwealth Secretariat titled “Assessing the Role of Central Banks in Building Resilience to Climate Change,” which illuminated the economic and environmental ramifications of climate change while emphasizing the urgency for action. The paper also highlighted the growing global momentum surrounding central bank engagement in climate change mitigation and green finance.
Key tools discussed for central bank involvement in climate change and green finance included green monetary policy, prudential regulation and policymaking, research and development, and transparency and disclosure. These mechanisms enable central banks to incentivize sustainable financing, encourage green investments, support research efforts related to green financing, and promote transparency by requiring financial institutions to disclose their environmental risk exposure.
The discussions at the meeting were marked by the sharing of experiences and the recognition of shared best practices in pursuit of greening the financial system, while also acknowledging the need to avoid mission creep, conflicts of interest, and the potential politicization of central banking. Ultimately, the deliberations underscored the alignment between addressing climate change and the central banks’ core objectives of ensuring price and financial stability. The Commonwealth Central Bank Governors Meeting concluded with a commitment from the Commonwealth Secretariat to facilitate collaboration and knowledge-exchange among central banks within the Commonwealth. This pivotal gathering preceded the Commonwealth Finance Ministers Meeting in Marrakesh.
