Posted on 21 December 2022
New findings of the WWF Sustainable Financial Regulations and Central Bank Activities (SUSREG) assessment 2022 show that despite initial steps taken by progressive jurisdictions, central banks and financial supervisors are not up to speed with the transition to a nature positive, net zero economy.
WWF has published a new report highlighting key findings from its SUSREG assessment 2022 which evaluates progress on sustainable financial regulations and central bank activities in 44 jurisdictions. Together, they represent over 88% of the global GDP, 72% of global GHG emissions and 11 of the 17 most biodiversity-rich countries in the world.
Overall, the assessment finds that despite progress by a number of front-running countries (which majority are members of the NGFS
), there are too many important gaps that hinder the transition to a nature positive, net zero economy.
This year's assessment looked at the performance of central banks and supervisors, including for the first time, the insurance sector. With US$ 30 trillion in assets under management and US$ 5 trillion in world premium volume, the insurance industry holds around a third of global economic assets and liabilities on their balance sheets.
Findings show some positive developments on sustainable banking and insurance regulation and guidance, as well as on disclosure/reporting are taking place in progressive jurisdictions:
WWF urges central banks, supervisors and insurers to:
- 88% of the jurisdictions issue banking regulations and supervisory expectations that take into account climate risks (79% for insurance regulation). Climate considerations are increasingly expected to be integrated in financial institutions’ business strategies as well as in risk management decision making processes and policies. However, broader environmental risks, including on nature loss, are still falling short.
- There is a growing requirement for mandatory climate disclosure of the risks from the impacts of climate change and the transition to a low-carbon economy (83% require climate disclosure from banks). But broader environmental-related disclosure is lagging behind. Measurement and transparent reporting alone is insufficient to achieve change at the scale and speed required.
- Central banks and financial supervisors are increasingly publishing climate and sustainability strategies and roadmaps. However many do not have time-bound transition plans in place. Credible, ambitious mandatory transition plans are crucial to accelerate climate mitigation, halt and restore nature loss.
- Implement credible, ambitious transition plans to accelerate climate mitigation, halt and restore nature loss. Transition plans must provide necessary clarity and guidance to financial markets actors and have clear quantifiable, legally binding climate and biodiversity goals for 2025, 2030, and 2050 covering all central banking, financial regulation, and supervision activities.
- Ensure that monetary policies and financial regulatory instruments better reflect the economic cost and financial risk of ‘always environmentally harmful’ economic activities, companies and sectors’ as these assets represent the highest financial risks. Financial institutions that are lending to companies involved in environmentally harmful activities should face far higher capital requirements to account for the long-term risks involved.
Welcoming the adoption of the Kunming-Montreal Agreement, which commits the world to act collectively and immediately to halt and reverse biodiversity loss by 2030, WWF urges central banks and financial supervisors to integrate those targets, and for financial institutions to steer away from lending and investing in companies with the most environmentally harmful activities whose assets are likely to become “stranded” as the world transitions.
To help reach these goals, WWF has set out a pathway to a climate safe and nature positive global economy,
for the financial sector to globally adopt new nominal anchors for their mandates – 1.5ºC, full biodiversity recovery by 2050, -50% GHG emissions (baseline 2019) and nature positive by 2030.