Introduction

This technical report focuses on the integration of sustainable and responsible investment (SRI) into central bank portfolio management, with emphasis on climate-related financial risks. It consolidates practical approaches from supporting technical work on corporate and sovereign portfolios, providing an operational framework aligned with mandates of safety, liquidity and return.

Setting the scene: Central bank investment portfolios

Central bank portfolios, largely composed of sovereign and corporate bonds, are exposed to climate transition and physical risks affecting creditworthiness and valuations. The report draws on technical analyses of corporate decarbonisation and sovereign risk assessment, highlighting the need to incorporate ESG considerations without compromising policy objectives or market neutrality.

Governance

The report outlines governance structures required to implement SRI, including board oversight, internal accountability and integration into risk management frameworks. Central banks increasingly require external asset managers to incorporate ESG criteria. Technical documents emphasise building internal expertise and ensuring consistency across asset classes, including corporate and sovereign exposures.

Measure

Measurement frameworks rely on climate and ESG metrics such as weighted average carbon intensity, financed emissions and sector exposure. Forward-looking indicators assess issuer alignment with net zero pathways. Supporting technical work highlights challenges in sovereign metrics and scope 3 emissions, noting data gaps and methodological inconsistencies across jurisdictions.

Act

Central banks implement SRI through exclusion policies, portfolio tilting, climate benchmarks and investment in green bonds. Corporate portfolio strategies focus on decarbonisation pathways, while sovereign approaches incorporate climate risk indicators and policy assessments. Engagement with issuers and asset managers is used to improve disclosures and transition planning.

Evaluate

Evaluation involves ongoing monitoring of climate risk exposure, portfolio alignment and financial performance. Frameworks such as TCFD support disclosure and transparency. Technical findings highlight the need for improved comparability of metrics and regular refinement of methodologies, particularly for forward-looking indicators.

Next steps

The report identifies priorities including improving climate data availability, advancing forward-looking metrics and strengthening reporting practices. It calls for continued methodological development and collaboration across central banks, supported by insights from technical analyses of corporate and sovereign investment approaches.

Case studies

Case studies demonstrate practical application of SRI, including use of climate metrics, ESG integration and portfolio decarbonisation strategies. Examples reflect differing institutional mandates and data constraints, illustrating how technical approaches to corporate and sovereign investments are adapted in practice.