Five strategies are identified that may help central banks to achieve their specific SRI objectives and scope:
- Negative screening
- Best-in-class
- ESG integration
- Impact investing
- Voting and engagement
The report concludes that:
“Applicability of these strategies depends on the constitution of the portfolio under consideration. Negative screening and green bond investments are currently the most prominent strategies across central bank portfolios. Both are straightforward to implement as they do not necessarily require a significant adjustment of the asset allocation or the investment process. Some central banks take a step further and implement a best-in-class approach or integrate ESG criteria in their investment processes. These strategies are mostly applicable to equity holdings within the own portfolios. By their very nature, these strategies are highly dependent on ESG data. Only one central bank applies impact investment (beyond green bonds) within its own portfolio. Finally, several central banks follow a voting and engagement approach, mostly within their own portfolios or their pension portfolios. Considerations relating to central bank independence are relevant for the latter strategy.”
This guide concludes with case studies of first‑hand experiences by NGFS members that already incorporate SRI principles in their portfolio management. While work is still needed with regard to critical elements relating to the availability of data, to transparency, disclosure and a global taxonomy, progress is being made around the world. These case studies are intended to help build critical momentum and lower barriers for other central banks to follow suit, thereby speeding up the transition to a more sustainable economy.