Monetary Policy, Financial Regulation, and Supervision
Strengthening regulatory frameworks and aligning monetary policy operations with climate goals are essential to ensuring financial stability and facilitating green investments.
2030 Goals
- Monetary policy frameworks fully account for climate risks and contribute to an orderly transition towards a net-zero economy, including through credit operations, asset purchases, and collateral policies.
- Financial regulation and supervision incorporates robust safeguards against physical and transition climate risks, and contributes to a net-zero and nature-positive financial system. This includes enabling treatment of assets (such as long-term infrastructure) and financing mechanisms (such as blended finance) that contribute to the transition.
StatusNo progress
No progress
- The NGFS reports that member central banks have conducted pilot programs to protect their own balance sheets and contribute to the transition through monetary policy operations.
- The FSB reports that progress has been made across all four blocks of its Roadmap for Addressing Climate-related Financial Risks (disclosures, data, vulnerabilities analysis, and regulatory and supervisory practices and tools).
- On the other hand, WWF reports that key gaps remain in regulatory/supervisory progress and that only 8 out of 45 central banks surveyed have made significant progress in accounting for climate risks in monetary policy operations.
- In particular, the regulatory treatment of climate-related assets should be reviewed to ensure institutions do not face unnecessary restrictions on financing climate investments, without compromising safety & soundness or financial stability.
- The IMF has issued new guidance for G20 countries, recommending that climate-related financial risks be included in monetary policy frameworks to enhance financial stability and facilitate green investments.
Leading Actors
Multilateral Development Banks
World Bank
International Organizations
Financial Stability Board, International Monetary Fund, OECD, UN
Alliances
G20, Glasgow Financial Alliance for Net Zero (GFANZ)
Supportive Stakeholders
World Wildlife Fund, Sustainable Finance Lab, International Sustainability Standards Board, International Financial Reporting Standards, Taskforce on Climate-related Financial Disclosures (TCFD), Sustainable Banking and Finance Network
Milestones
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Resources
The below resources all pertain to the topic of Monetary Policy, Financial Regulation, and Supervision.
IMF G20 DGI Recommendations
Private Finance, Monetary Policy, Financial Regulation, and Supervision
The DGI-3 covers 14 recommendations addressing priority policy needs in the areas of: (i) climate change; (ii) distribution of household income and wealth; (iii) fintech and financial inclusion; and (iv) access to private sources of data and administrative data, and data sharing to improve the timeliness and granularity of official statistics.
Toolkits for Policy makers to green the financial system
Private Finance, Monetary Policy, Financial Regulation, and Supervision
Guide for Supervisors Integrating climate-related and environmental risks into prudential supervision, Technical Document, NGFS
Private Finance, Monetary Policy, Financial Regulation, and Supervision
UN Principles for Responsible Banking,Principles for Responsible Investment, Principles for Sustainable Insurance
Private Finance, Monetary Policy, Financial Regulation, and Supervision
OECD Center on Green Finance and Investment : A global platform for knowledge exchange between the private sector, government and regulatory institutions, academia, and civil society.
Private Finance, Monetary Policy, Financial Regulation, and Supervision
Primer for climate related engagement with the IMF
Private Finance, Monetary Policy, Financial Regulation, and Supervision
Sustainable Stock Exchanges Initiative
Private Finance, Monetary Policy, Financial Regulation, and Supervision
A UN Partnership Program, whose aim is to support members in working with stakeholders including investors, issuers, regulators, supervisors, policymakers, and international organizations to enhance sustainable finance.