Unused tools: How central banks are fueling the climate crisis
This report dissects the role of central banks in fossil fuel finance and climate change, presenting 10 criteria for assessment and analysing 12 central banks worldwide. While there is increased recognition among global central banks of the severity of climate change, they continue to prop up fossil fuels and largely maintain an industrial structure that uncritically exacerbates the climate crisis.
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OVERVIEW
This report examines the extent to which central banks are contributing to the continuing climate crisis by providing the means to finance the fossil fuel industry and maintaining structures that exacerbate the situation. Although central banks have the means to accelerate the transition from fossil fuels, many have yet to act in the interests of reducing carbon emissions.
The report highlights that the role of central banks is significant to resolving issues related to climate change. If they were tasked with tackling carbon pollution, then it could lead to a significant reduction in carbon emissions stemming from the finance sector. This is a critical step in achieving the Paris Agreement’s objectives.
This study analyses twelve central banks and identifies ten criteria to evaluate the central banks’ efforts to reducing carbon emissions. These criteria include asset management, rules for commercial banks, and sustainable finance definitions. The report ends with a table comparing these criteria and central banks’ efforts, highlighting the banks’ strengths and weaknesses.
The study found that many central banks are yet to implement significant measures that could restrict fossil fuel finance. Although some central banks have taken action to reduce carbon emissions, others are still highly invested in the fossil fuel industry. Furthermore, central banks lack disclosure requirements for emissions intensive assets. Overall, the report concludes that central banks must work together to form a cohesive strategy towards divesting from fossil fuels.
The authors recommend that central banks exclude fossil fuels from asset management and create regulations that hold corporate banks accountable for their environmentally destructive activities. Additionally, it suggests that more research must be done to analyse the risks of fossil fuel finance. The report also recommends that central banks promote sustainable finance and issue public statements on the importance of ending fossil fuel finance. This study is a call-to-action for central banks to remain committed to ending unsustainable finance and making strategic shifts to protect the planet from climate change.
