Central banks and the green transition

The problem

The effects of climate change are becoming larger and more frequent, threatening ecosystems and human livelihoods worldwide. Communities in the Global South face the most severe impacts of climate change, despite bearing the least responsibility.

We need to invest a huge amount of money to transform energy and economic systems so that they support a fair and healthy future for all. But right now, our banks and financial institutions are still pouring billions every year into risky fossil fuels, even though the science is clear that we must rapidly wind-down fossil fuels and green our energy systems. The world’s addiction to fossil fuels has also driven soaring energy prices, leaving people across the world unable to afford basic essentials.

What we need now

We need our governments, central banks and financial regulators to work together to rethink and redirect our financial systems so that they support a greener and fairer future.

Central banks are powerful, publicly-owned institutions that sit at the heart of the global financial system. Together with governments, they have the power to change the rules so banks stop investing in harmful activities like fossil fuels, and to direct money flows towards the things we really need, like renewable energy, sustainable transport, well-paid jobs and climate justice. They’re charged with maintaining price and financial stability, but If banks continue to plough money into fossil fuel assets that become stranded as we move to a green energy system, it could trigger a serious financial crisis. And as the impacts of climate change continue to materialise, we are more likely to see price inflation.

Milestones so far

Our key projects to support a just green transition are:

• The Green Central Banking Scorecard - produced by Green Central Banking and Positive Money, the scorecard ranks the G20 central banks and prudential regulators based on their environmental policies and initiatives.

• Working to unpack the impacts of fossil fuel reliance and accelerating climate change in driving price inflation - ‘climateflation’ and ‘fossilflation’ are increasingly shaping our economies worldwide, and we need macroeconomic policies that are suitable for these challenges.

• Reforming the international monetary and financial system for economic and environmental justice - the global financial system is extractive and rooted in slavery and colonialism. This project is looking at how Global North currencies and Central Bank policies lead to finance flowing in the wrong direction, from the Global South to the Global North. We’re working to understand how it can be rewired so that financing solutions do not worsen existing economic and climate injustices.