WILL THE EUROPEAN CENTRAL BANK GET IT NOW?


Is Lagarde on the challenge of leading the bank in a climat awakening Europe?

My personal view is that any institution has to actually have climate change risk and protection of the environment at the core of their understanding of their mission,” Ms. Lagarde said.


Lagarde is pledging to make the European Central Bank more conscious of the environment as she now is confirmed as its new president. Lagarde has urged the European Parliament to start a project to create a unified classification system on what may be considered environmentally sustainable investments.
The European Central Bank could be open to channeling more of its bond purchases toward economic sectors that meet such criteria, she said. The European Central Bank has increased it´s scrutiny. The bank recently warned that “more frequent and severe disasters” would hit the banking and insurance industries, including the erosion of the value of collateral and assets held by banks, and insurance liabilities related to weather-linked catastrophes. An unexpectedly rapid shift by investors away from fossil fuels could also weaken bank balance sheets and destabilize the financial system, the bank added.
But the bank itself has also faced criticism. Environmental organizations have accused the European Central Bank of buying so-called dirty bonds from companies in industries that are said to be polluting, including cement makers and auto manufacturers, as part of its program to increase liquidity in the eurozone economy.

My personal view is that any institution has to actually have climate change risk and protection of the environment at the core of their understanding of their mission,” Ms. Lagarde said.

She will take over one of the world’s most powerful monetary institutions in November.
Members of the European Parliament — where political parties with an environmental platform made significant gains in elections this summer — also peppered her repeatedly with queries about the need to more effectively integrate fighting climate change into the bank’s mandate.

“The primary mandate is price stability,” she said, answering to members of the economic and monetary affairs committee. “But it has to be embedded that climate change and environmental risk are mission critical.” Asked whether she would shift the European Central Bank’s strategy to focus on buying bonds of nonpolluting companies, Ms. Lagarde was noncommittal but promised to review the situation.
Lagarde added that the bank had already been buying so-called green bonds that are earmarked for climate and environmental projects, but that there weren’t many available because the market was still being developed. Still, she said, if the central bank signals an interest in those assets, it could encourage a more rapid expansion of the market.
A few years ago bankers barely mentioned a warming climate in their assessments of the economy or of the global financial system. Today over 30 central banks and regulators not including those in the United States and Brazil have joined forces in a group called the Network for Greening the Financial System to focus on the potential financial consequences of global warming.
Founded by the Bank of England governor Mark Carney who first warned of the economic damage of climate change in a stark 2015 speech. And many of the world’s biggest companies, including Silicon Valley tech firms and large European banks, are preparing for the possibility that climate change could substantially hit their profitability within the next five years, according to a recent analysis of corporate disclosures.
“Lagarde could make the E.C.B. greener,” Sven Giegold, a German and co-leader of the Green Party members in the European Parliament, said in a statement after the hearing. “Lagarde will put climate risks at the center of financial stability. Lagarde has understood, that economics and ecology must go together.”


SOURCE: NY TIMES 4 September 2019

Share:

Shall we send you a message when we have discounts available?

Remind me later

Thank you! Please check your email inbox to confirm.

Oops! Notifications are disabled.