A report by Reclaim Finance reveals that G20 and Eurosystem central banks are lagging behind when it comes to investing sustainably, in particular failing to consider the climate impact of their investments. According to the NGO, it’s a case of “do as I say, not as I do”, given that they are also issuing warnings about the effects of climate change on the financial system and calling on private financial institutions to take them into account.
Only a quarter of G20 central banks are nominally committed to investing responsibly, all of them from Europe. In the Eurosystem itself, eight central banks are still to adopt any kind of SRI (Sustainable and Responsible Investment) approach.
According to Reclaim Finance, only one – the Banque de France – of these SRI policies is taking the climate emergency seriously, by aiming to align portfolios with 1.5°C, opposing fossil fuel development and restricting support to major polluters. Four central banks – in France, Slovenia, Germany and Switzerland – have some kind of fossil fuel restriction. With the exception of France, these restrictions are especially flawed and limited, allowing banks to support fossil fuel expansion and the coal sector.
Painting themselves green
How do central banks cover up this woeful lack of action? The NGO details five tricks to pass as responsible investors while continuing to invest in major polluters: maintaining opacity; investing in green bonds; waving around the principles for responsible investment (PRI); focusing on “best-in-class” approach; and settling for toothless international norms. These tricks, that have also been extensively used by private financial players, are used to justify an SRI approach without suggesting any concrete improvement of the environmental impact of the bank’s investments and – of course – alignment with the Paris Agreement. Out of 14 Eurosystem central banks with SRI policies, nine are highly opaque, including six that do not disclose any credible information to justify their SRI claims (Luxembourg, Austria, Belgium, Spain, Portugal and Ireland). The European Central Bank (ECB) even went as far as to refuse Reclaim Finance’s request to disclose its SRI policy.
BCL: “A very weak – or even misleading – policy”
In the report, the Banque centrale du Luxembourg (BCL) is being criticised for its “very weak policy SRI”. BCL “discloses little to no information on their SRI policies. They stop at saying that they apply SRI policies, without describing the criteria – or even the objective – they set”.
The analysis of the ESG/environmental policies is unequivocal: “The opacity of the Central Bank of Luxembourg’s policy and the mere reference to ESG suggests a very weak – or even misleading – policy. It also seems that the policy only covers a share of the non-monetary portfolios managed by the bank.”
The full report is available HERE
Publié le 21 décembre 2021