DWS’s team for ESG Thematic Research has called for central banks to implement responsible investment frameworks for their reserves and pensions by becoming signatories to the Principles for Responsible Investing (PRI).
While central banks have been focusing on encouraging corporate and investor transparency as it relates to climate risk, DWS in a research paper published today suggests that central banks should be more active in supporting the transition to low-carbon economies and the UN Sustainable Development Goals through their macro and micro-prudential activities.
Michael Lewis, head of ESG Thematic Research at DWS writes in the paper: “Climate change has, and will continue to be a key area of focus given the potential risks that extreme weather events, the transition to a low carbon economy and the increasing threat of litigation risk around climate change pose to financial stability. The European Central Bank itself recently stated that central banks themselves should adjust the way they operate by expanding the use of ESG criteria in the build-up and management of their own asset portfolios. The Dutch Central Bank is leading the way by becoming a PRI signatory in early 2019. We encourage other central banks to follow DNB’s example and aim to become leading responsible investors.”
Other ways for central banks to take a more active role include, according to DWS’s ESG Thematic Research team, monetary policy settings, building the evidence base for differentiated capital and reserve requirement ratios such as by supporting the creation of energy efficient mortgages and green bonds, and establishing responsible investment frameworks for central bank balance sheets, reserves and their own pension funds.