Green Finance Data Of Growing Interest To Central Banks, Says Study

December 21, 2021
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Central banks are increasingly assessing sustainable finance in pursuing their core mandates, a survey by the Irving Fisher Committee on Central Bank Statistics has found.

Central banks are increasingly assessing sustainable finance in pursuing their core mandates, a survey by the Irving Fisher Committee on Central Bank Statistics (IFC) has found.

Sustainable finance, defined as the integration of a wide range of environmental, social and governance (ESG) aspects when making investment decisions, is getting increasing attention from public authorities and central banks, the survey said.

This is partly due to the impact of climate change, inequality and various factors that can weaken economic resilience, such as a pandemic. Meanwhile, more and more central banks look at the financial sector as one that can play a special role in sustainable development, both directly through its own actions and indirectly through its financing of external activities, said researchers.

The IFC, which is part of the Bank for International Settlements (BIS), was looking at data received from 63 countries to analyse the ESG data needs of central banks, as well as data availability and potential gaps.

The key finding of the survey is that central banks are increasingly looking for statistics on sustainable finance in pursuing their core mandates, such as financial stability or reserve management. It shows that, at the moment, central banks' primary focus is on environmental indicators, while social and governance indicators are only used to a “fairly limited” extent.

The survey identified almost 80 ESG metrics that central banks consider of particular relevance when pursuing their policy objectives, including green public investment or forward-looking climate scenarios, among others.

At the same time, central banks have been playing a significant role in setting up statistical frameworks for sustainable finance. For instance, they have been instrumental in facilitating the development of green taxonomies, according to the IFC.

Although the availability of green finance data is in general on the increase, the survey finds that there are substantial differences across jurisdictions. Central banks in advanced economies typically reported that they already have in place standardised definitions and taxonomies, while emerging market economies are still at an early stage of this process.

The organisation recommends central banks intensify the identification of data needs to pursue relevant policy objectives.

“One precondition for developing sustainable finance is to identify the data needed by central banks to support their policy objectives. This requires proper statistical definitions and taxonomies to be established as a key first step,” the survey says.

The organisation also recommends that central banks increase cooperation among the various stakeholders involved in sustainable finance data to close data gaps. This comes after central banks reported that a large number of ESG data providers, which play an important role in supplying data, sit outside the traditional perimeter of official statistics.

As a final point, the IFC urges central banks to “lead by example by improving the usage of the new data being collected”.

“Collecting data is not enough and should be complemented by efforts to make good use of them for policy purposes, ideally by covering the large spectrum of central banks’ policy tasks,” the organisation says.

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