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NGFS: Germany’s Bundesbank presents guide for ESG in central bank portfolio management

Survey finds that 25 of the 27 participating central banks already take SRI criteria into consideration in portfolio management

Germany’s Bundesbank has presented a guide for fellow central banks – put together by the members of the Network for Greening the Financial System (NGFS) – on how to approach sustainable and responsible investment in their portfolio management.

The guide was due for release at a press conference by Executive Board Member Dr Sabine Mauderer, who chairs the “Scaling up green finance” workstream at the NGFS, the relatively new high-level group.

“Central banks are striving to be role models”

The handbook will be presented at the International Monetary Fund (IMF) Annual Meeting in Washington, DC tomorrow (October 18). A key feature of the document is a series of case studies (see separate article).

The 41-page guide represents a first global stock-taking exercise among central banks.

“SRI is becoming an increasingly important topic for central banks,” said Dr Mauderer. “Our survey shows not only that central banks are striving to be role models, but also that they are taking SRI into account in their risk-return considerations.”The survey found that 25 of the 27 participating central banks already take SRI criteria into consideration in portfolio management, or plan to do so in future.

Of these 25 central banks, all of them take SRI criteria on board in the management of their own portfolios, or are considering doing so.

Mauderer went on to say: “The majority of central banks that consider sustainability factors in portfolio management pursue a broad ESG approach. Only 16% are specifically focused on climate risk.”

“Our survey reveals that the top four motives for considering SRI aspects are avoiding reputational risk, safeguarding against sustainability risks, “leading by example”, and improving the risk-return profile.”

It comes as a new report has said that central banks could develop a brown taxonomy, shift purchasing towards green assets and review the doctrine of “market neutrality”. These are the measures they could take to address the systemic risk climate impacts pose to the global financial system, according to a report from the Climate Bonds Initiative in conjunction with the SOAS Centre for Sustainable Finance and WWF.

See an earlier RI interview with Dr Mauderer here