Central banks and supervisors need to adopt a more “integrated” approach to managing climate- and nature-related risks as the issues are often interdependent, WWF has argued.
Maud Abdelli, lead of the Greening Financial Regulation Initiative at WWF, told an Environmental Finance webinar that central bankers need “to start implementing an integrated approach for climate and nature and really stop looking at those separately”.
Financial supervisors and central bank should use “all the tools they have in their remit to start taking impactful action”, she added.
It was one of the main recommendations from a report WWF published in December, she said.
While significant progress has been made by several central banks and financial supervisors on climate, gaps remain – particularly in high-income countries, 20 of which, including the US, Japan and South Korea, were criticised for “weak climate banking supervision policies” even though they have set net-zero targets, the report said.
It called on central banks and supervisors to:
- urgently publish their own transition plans,
- use their monetary policy tools to tackle the risks and
- impose higher capital requirements on financial institutions’ lending, investing and insuring companies with environmentally harmful activities such as coal, oil and gas expansion.
Other main recommendations in WWF’s 2023 SUSREG report included that central banks and supervisors “adopt a more precautionary approach in setting macroprudential regulation and supervision”.
“This means acknowledging that we will never have the perfect model or data to deal with nature-related risk in the future, so really focus on the most environmentally harmful sectors for both climate change and nature loss and really try to understand the risks and the impact the financial sector could have on the transition,” Abdelli said.
She also said capacity building among regulators is “super important” so they can deliver on their objectives on nature and climate.
Jean Boissinot, deputy director for financial stability at the Banque de France, told the webinar that developing scenarios for nature loss was “one of the most complex tasks I have ever seen”.
A recording of the webinar, which was sponsored by WWF and hosted speakers from the Banque de France, Monetary Authority of Singapore and the Taskforce on Nature-related Financial Disclosures, is available to view here.
Earlier this month, a separate report by WWF criticised a lack of concrete action on central bank work to raise awareness of nature’s links to financial stability.