Central banks, when purchasing financial assets, should consider selecting assets that will promote sustainability, including climate change mitigation and adaptation. During the 2008 financial crisis, central banks deployed unconventional means to rescue failing banks and insulate economies from depression. Their asset purchases have had strong social impacts, but traditionally, central banks have not explicitly factored social objectives into their decisions or evaluated their impacts beyond the narrow monetary domain. Social impact investing is consistent with a central bank’s mandate to maintain price stability, but those not yet ready to move in this direction should at least incentivize bankers and asset managers to invest in, or lend to, climate mitigation activities and low-emission growth, as well as support a financial transaction tax.
Series: Fixing Climate Governance Series
Environmentalists have been campaigning for effective policy changes for more than two decades. The world’s governments have been negotiating since 1995 as parties to the United Nations Framework Convention on Climate Change. Their 2015 Paris Agreement created a new regime for joint action; among other things, it is the first UN climate agreement to oblige all parties to make some contribution. Each party made a pledge pertaining to the period 2020 to 2025 or 2030. But it is widely agreed that if they are all implemented, together these 2015 pledges will still fall far short of what is needed to meet the collective goals and avoid widespread catastrophes. Important details of the Paris Agreement itself also remain to be negotiated. Nor is the UNFCCC the whole of international climate governance. Many initiatives have also been launched by smaller sets of countries, national governments, provinces, cities, civil society, and private investors and companies.
This project is designed to generate improved ideas for both the UNFCCC process and other possible sites of climate governance. During 2015 we published nine policy briefs and papers, which can be found below. The ideas in two of them appeared in Paris during COP21. Several offered original recommendations for more effective action outside the UNFCCC. A new series of publications will appear during 2016-2017.