Central banks, financial supervisors are failing to integrate environmental risk, WWF warns

Central banks and financial supervisors are making some progress in “greening” their activities, but they are still largely failing to properly integrate climate and environmental risks into their decision-making.

That is according to the latest edition of WWF’s Sustainable Financial Regulation and Central Bank Activities Tracker.

The report looked at the integration of climate, environmental and social risks into central banking, financial regulation and supervision activities in more than 47 jurisdictions around the world.

The economies surveyed together represent 88 percent of global GDP, 72 percent of global greenhouse gas emissions and 11 of the 17 most biodiversity-rich countries in the world.

The analysis concluded more than two thirds of high-income countries have not yet adopted adequate climate and environmental banking supervision policies.

Central banks and supervisors need to take up a prominent role in directing finance away from the most environmentally harmful sectors.

The tracker warned that just 18 percent of central banks are showing “exemplary progress” in integrating climate-related risks into their monetary policy and central banking activities.

More than half of the 37 countries assessed that had net zero targets in place were found to have “considerably weak” climate-related banking supervision policies.

In the most biodiverse countries of the Asia-Pacific and Latin America, sustainable banking and insurance supervision policies are also falling short, leaving them highly-exposed to nature-related risks, WWF said.

“Central banks and supervisors need to take up a prominent role in directing finance away from the most environmentally harmful sectors like coal, gas and oil, and set minimum ESG expectations in financial regulation and supervision,” said Maud Abdelli, lead for WWF’s Greening Financial Regulation initiative.