Central Banks and Supervisors Network for Greening the Financial System (NGFS)

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Last updated: July 2018

Website: www.banque-france.fr/node/50628

Contact: sec.ngfs@banque-france.fr

Summary: The Central Banks and Supervisors Network for Greening the Financial System (NGFS) “is the only forum worldwide bringing together central banks and supervisors committed to better understand and manage the financial risks and opportunity of climate change.”[1] The network was launched in December 2017, during the One Planet Summit and  gathers, as of July 2018, 16 members participating in three different work streams: supervision, macro-financial and mainstreaming green finance.

What are the objectives of the initiative?

“The Central Banks and Supervisors Network for Greening the Financial System (NGFS) is a group of Central Banks and Supervisors willing, on a voluntary basis, to exchange experiences, share best practices, contribute to the development of environment and climate risk management in the financial sector, and to mobilize mainstream finance to support the transition toward a sustainable economy. Its purpose is to define and promote best practices to be implemented within and outside of the Membership of the NGFS and to conduct or commission analytical work on green finance.”[2]

Who launched it? Who is participating?

As of July 2018, “[t]he Network brings together the BaFin, the Bank al Maghrib, the Banco de España, the Banco de Mexico, the Bank of England, the Banque de France and the French Autorité de Contrôle Prudentiel et de Résolution (ACPR), De Nederlandsche Bank, the Deutsche Bundesbank, the European Central Bank (ECB), the Swedish Finansinspektionen, the Japan FSA, the Monetary Authority of Singapore, the National Bank of Belgium, the Oesterreichische Nationalbank (OeNB) and the People’s Bank of China (PBOC).

Several institutions have joined the NGFS as observers: the Bank for International Settlements (BIS), the World Bank Group, the Organisation for Economic Co-operation and Development (OECD), the European Bank for Reconstruction and Development (EBRD), and the Sustainable Insurance Forum (SIF).”[3]

“Adhering to the NGFS reflects a political commitment from an institution and also implies the will and capacity to actively contribute to the work. For that reason, any supervisory authority or central bank committed to actively contribute to the objectives and work of the NGFS is eligible to be a NGFS member, as provided by article 2 of the NGFS Charter (see “Governance”). The NGFS Membership aims to achieve a diverse representation of institutions in terms of geographic areas as well as between developed and emerging countries.”[4]

Why has this been put into place?

Financing the transition to a green and low carbon economy consistent with the ‘well below 2°celsius’ goal set out in the Paris agreement and promoting environmental sustainable growth are among the major challenges of our time. In the process of responding to environmental and climate challenges, there are both opportunities and vulnerabilities for financial institutions and the financial system as a whole. […] The Network’s purpose is to help strengthening the global response required to meet the goals of the Paris Agreement and to enhance the role of the financial system to manage risks and to mobilize capital for green and low-carbon investments in the broader context of environmentally sustainable development.”[5]

What are the main work streams/areas of work?

“The NGFS work programme includes experience sharing and identification of best practices on the supervisory and macrofinancial dimensions of climate-related and environmental risks as well as on options to scale up green financing.”[6]

The NGFS has three dedicated work streams:

1) Supervision (WS1 – chaired by Ma Jun from the People’s Bank of China):

  • Conduct a mapping of current supervisory practices for integrating environmental (climate) risks into micro-prudential supervision
  • Environmental information (climate risk) disclosure by financial institutions and options to encourage disclosure
  • Considering the extent to which a financial risk differential exists between ‘green’ and ‘brown’ assets

2) Macro-financial (WS2 – chaired by Sarah Breeden from the Bank of England):

  • How can climate change and the transition impact upon the macroeconomy?
  • How can climate change and the transition impact upon financial stability?
  • What are examples of good practices?
  • Where are the gaps in our collective knowledge? What are the priority questions which need answering?

3) Mainstreaming green finance (WS3 – chaired by Joachim Wuermeling from the Deutsche Bundesbank):

  • Greening the activities of Central Banks and supervisors
  • Understanding/monitoring the market dynamics of green finance
  • Central banks/supervisors as catalysts for greening the financial system

What are concrete outcomes (both political and in terms of recommendations)?

“The Network will serve as a voluntary platform and a forum for authorities to exchange views and best practices with regards to climate related risks for the financial sector and the development of green finance. Its purpose is not to issue binding policy recommendations.”[7]

Have intermediate or final reports / guidance been issued?

As of July 2018 the NGFS did not publish any reports.

Calendar and milestones

Associated Supporting institution of the Climate Action in Financial Institutions Initiative:

As of July 2018, Supporting Institutions of the Climate Action in Financial Institutions Initiative are not part of the NGFS. The European Bank for Reconstruction and Development (EBRD), however, is an observer to the Network. 

[1] www.mas.gov.sg/~/media/resource/news_room/press_releases/2017/FAQs%20%20Greening%20the%20Financial%20System.pdf

[2] www.banque-france.fr/en/financial-stability/international-role/network-greening-financial-system/about-us

[3] www.banque-france.fr/en/financial-stability/international-role/network-greening-financial-system/about-us

[4] www.banque-france.fr/en/financial-stability/international-role/network-greening-financial-system/about-us

[5] www.banque-france.fr/node/50628

[6] www.banque-france.fr/en/financial-stability/international-role/network-greening-financial-system/publications

[7] www.mas.gov.sg/~/media/resource/news_room/press_releases/2017/FAQs%20%20Greening%20the%20Financial%20System.pdf

Links with the 5 Voluntary Principles for Mainstreaming Climate Action

As of July 2018 the NGFS has yet to publish any reports or recommendations. Yet, the three work streams, notably the WS 3 on “mainstreaming green finance”, are likely to produce relevant outputs regarding the 5 Principles for Mainstreaming Climate Action.

Adopt the 5 voluntary Principles