The Central Bankers’ Identity Crisis

Financial regulators are joining the climate fight – but is it clear what they are meant to be doing?

By James Vaccaro, February 2022

Removed from the flood of attention-grabbing pledges at COP26, the world’s guardians of finance quietly rolled out a set of new climate policies and positions. While the Network for Greening the Financial System – now a hundred members strong – portrays unity and coordination across these powerful institutions, a rift may be forming in its ranks.

 Financial regulators are split on the nature of their role in the transition to a sustainable economy. Central banks and supervisors in the Global North remain wedded to the myth of market neutrality, adopting a purely risk-based approach that seeks to restore the smooth and efficient functioning of markets. Many of their counterparts in the Global South, on the other hand, are increasingly seeing themselves as active agents in the struggle for 1.5 degrees Celsius.

Read more about capital requirements, different approaches to risk by central banks across the world, and one-to-one rule in the full blog.