New climate consensus moves forward without the U.S.
The world's top economic institutions are going deeper in the fight against climate change, and central banks are re-evaluating policies and pushing new principles to integrate climate-related risks into financial supervision, leaving the U.S. behind.
On one side: The effects of climate change are everywhere, European Central Bank chief economist Philip Lane said during the IMF's fall meetings last week.
- "Every sector will be affected … it’s absolutely core to central banking."
- "To deliver our core mandate we absolutely have to be involved," Lane added.
That sentiment has been backed strongly by ECB chief Mario Draghi as well as Bank of England President Mark Carney, who's organized a coalition of 46 central banks and regulators called the Network for Greening the Financial System (NGFS). Last week the network published a technical guide to help its members weave sustainability into portfolio management.
- The People's Bank of China has started incorporating environmental factors into its monetary policy framework and financial stability assessments, and has been a global leader on the issuance of environmentally conscious green bonds.
- Even noted skeptic David Malpass, now president of the World Bank, has committed to a $200 billion Climate Change Action Plan.
On the other side: President Trump yanked the U.S. out of the Paris climate agreement and his administration announced "climate change will not be on the agenda" at the June G7 meeting.
- Fed chair Jay Powell called climate change "an absolute first-order issue" in a speech earlier this month, but said it was not clear to him if it's "a first order of business for central banks."
- The Fed and Bank of Brazil are the only major central banks not taking part in NGFS.
The big picture: While the IMF and World Bank have for years examined climate and pushed for carbon pricing, the institutions are getting more active — substantively and symbolically.
- A senior IMF official tells Reuters that the fund is looking at how much climate-related risks are priced into market valuations.
- "We are going to look at stock markets country by country, then by sector,” said Tobias Adrian, who heads IMF's monetary and capital markets department.
- And as the Financial Times notes, new IMF managing director Kristalina Georgieva announced that the organization “is gearing up very rapidly to integrate climate risks into our surveillance work."
- "For the IMF, we always look at risks, and [climate change] is now a category of risk that absolutely has to be front and center in our work," she said.