ESG for central banking focus report 2021

The Covid-19 pandemic heightened the realisation that climate change cannot simply be solved by a tax – there is a need to steward the transition towards net-zero. Environmental, social and governance (ESG) reporting and investing is one option on the table and is a framework every financial institution is now considering – central banks included.

The mounting pressure to implement ESG has arisen from legislators, consumers and the media. To remain attractive as a business, you need to perform well from an ESG perspective. This report highlights some of the regulatory initiatives under way worldwide to ensure the financial sector takes into account their actions with regards to climate change – voluntary disclosures can only do so much but a change in the tide could see mandatory ESG reporting become mainstream.

The report also flags challenges for central banks themselves – as guardians of the financial system, they have a duty to lead by example. But the lack of liquidity within ESG-compliant assets is proving a problem for many.