Earlier this year we reported on global Investor Group on Climate Change, who had put governments on notice ahead of the G20, that if they expected ongoing private investor money, then they needed to get on board with Paris Agreement goals.This week Sweden's central bank became the first to take a stand and act according to their own stated mission and use monetary policy in the climate crisis battle. The Swedish Central Bank, Sveriges Riksbank has sold debt from Queensland and Western Australia along with the Canadian province of Alberta from its portfolio of foreign exchange reserves. The Riksbank held 8 percent of it's foreign country reserves in the three states and has sold them, despite the relatively high yields. The bank's deputy governor Martin Floden said:
"UNDER A NEW POLICY THE CENTRAL BANK WILL NOT INVEST IN ASSETS ISSUED BY ISSUERS WITH A LARGE CLIMATE FOOTPRINT. AUSTRALIA AND CANADA ARE COUNTRIES THAT ARE NOT KNOWN FOR GOOD CLIMATE WORK."
As more central bankers add voice and direct action to the relationship between climate change and the existential risk to the financial system, Riksbank's Floden has also noted that he doubts the (fallback) strategy of central banks buying green bonds is relevant to a sustainability criteria path, partly because of the same green bonds own debt issued by governments. BECAUSE IT IS DIFFICULT TO IDENTIFY SPECIFIC FUNDS FOR ENVIRONMENTAL PROJECTS IN GOVERNMENT BUDGETS, FLODEN IS FOCUSING INSTEAD ON AVOIDING BOND ISSUERS RESPONSIBLE FOR HIGH EMISSIONS. LIKE AUSTRALIA AND CANADA.This point is extremely important as it nails the avoidance of doubt in deciding what is backed and what is not. You can't game a simple per capita emissions count.
While politicians who don't like the power flexing of large investment dollars love to say that 'central bankers are not climatologists', central bankers are humans and presumably emissions are emissions. And since many politicians aren't listening to the climatologists in any event, the point is mute. Certainly the protesters campaigning outside Frankfurt's central bank after Christine Largarde's appointment summed it up. "If the Earth was a bank, you'd have rescued it." Next step is for banks to rescue the Earth, whether politicians agree or not. And in that endeavour, judging by the signs on the streets of the world, we wish them the very best.