The role of central banks in scaling up sustainable finance – what do monetary authorities in the Asia-Pacific region think?

ABSTRACT

This article presents the findings of a survey among 18 central banks from the Asia-Pacific region regarding their views on approaches to scale up sustainable finance and develop policies to address climate and environmental risks. It also reviews recent developments in selected Asia-Pacific countries to illustrate actions monetary and financial authorities have already taken to address climate and environmental risk, and in scaling up sustainable finance. The survey results show that this is a topic of increasing importance and relevance to monetary authorities in the region. The vast majority of survey respondents believe that they should be playing a key role in promoting green finance and sustainable funding options, either through amending the regulatory framework, encouraging green loans and products or by introducing climate change considerations in their monetary and financial policy operations.

KEYWORDS:

• Sustainable finance
• central banking and financial supervision
• Asia-Pacific

Acknowledgements

The views expressed in this paper are those of the authors alone and do not necessarily reflect the views of SEACEN or its member institutions. The authors are grateful for useful comments received from participants at the SEACEN High-Level Seminar and Meeting for Deputy Governors of Financial Stability and Supervision in Kuala Lumpur in July 2019, a Distinguished Speaker Seminar at the Asian Development Bank Institute (ADBI) in Tokyo in August 2019, the National Asset-Liability Management Asia Conference in Singapore in September 2019, and an ADBI workshop on “Green Infrastructure Development in Asia: Investment, Financing and Economic Impacts” in November 2019. The usual disclaimer applies.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Observers include the International Monetary Fund, the World Bank, the Bank for International Settlements, the Basel Committee on Banking Supervision and the Organisation for Economic Cooperation and Development, among others.

2 The TCFD was established by the Financial Stability Board in January 2016 and chaired by Michael Bloomberg.

3 There is no single agreed definition of the countries comprising the Asia-Pacific region. We follow the widely used convention that it includes countries from Northeast, Southeast and South Asia as well as Oceania.

4 The SEACEN Centre was established as a legal entity in 1982 with a membership of eight central banks / monetary authorities. It has since grown to 19 members, and a total of 35 including associate members and observers.

5 For a more comprehensive review of sustainable finance across Asia, see Volz (2019).

6 In 2012, SEBI created requirements known as the Annual Business Responsibility Reporting, a reporting framework based on the National Voluntary guidelines on Social, Environmental and Economic Responsibilities of Business (NVGs) that had previously been released by the Ministry of Corporate Affairs. Such reporting requirements also subsequently increase demand for sustainability-linked financing.

7 On the emergence of sustainable finance in Indonesia see Volz (2015) and Volz et al. (2015).

8 In 2012, Bank Indonesia issued Green Lending Model Guidelines for Mini Hydro Power Plant Projects.