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Central banks should make Green Investment decisions, ‘for the sake of all our futures’

July 3, 2017

Josh Ryan-Collins, co-founder of the Brixton Pound, is senior economist at the New Economics Foundation, visiting research fellow at Southampton Business School’s Centre for Banking, Finance and Sustainable Development and at London’s City University Political Economy Research Centre. His research focuses on financial reform, including structural banking reform and monetary policy and he is co-founder of the ‘Brixton Pound’ local currency in South London.

Edited extracts from his recent article:

Josh sets the scene – pointing out that the European Central Bank is currently creating €60bn a month in new money under its ‘Quantitative Easing’ program, which is being used to purchase a range of public and commercial assets across Eurozone member states. They have so far bought £82 billion worth of corporate bonds. The Bank of England, meanwhile, completed its £10bn corporate bond programme in May.

The criteria central banks use to choose the types of corporate bonds to purchase are ‘market-neutral’; they base their decisions on much the same criteria as any other large commercial investor, purchasing high quality, ‘investment grade’ assets. New research by the London School of Economics’ Grantham Institute released last week suggests that when it comes to carbon-intensity, corporate QE purchases are favouring high carbon sectors.

A number of central banks clearly recognise the risks to financial stability posed by climate change, as Mark Carney’s “Tragedy of the Horizon” speech (on the horizon?) and three later addresses made clear, but as yet their focus has been confined to encouraging greater ‘disclosure’ by financial market participants.

Mark Carney, dubbed an unlikely champion

Ryan-Collins insists, “Central banks must go further. Institutional investors are already accounting for environmental and social governance criteria in making their investment decisions. With the world rocked by Trump’s decisions, it is more urgent than ever for us to call upon central banks to do the same and take a step towards mainstreaming ‘green’ finance – for the sake of all of our futures.

 

 

 

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