Top central banker defends climate work after US pushback

Top central banker defends climate work after US pushback






A senior central banker has defended supervisors’ work on climate change after attacks from the US, and warned officials had previously “completely underestimated” the risks rising temperatures pose to the financial system.

Central bankers are “non-political animals” and “pure technocrats” who simply follow their “job description” when they work on climate change, said Sabine Mauderer, deputy governor of the Bundesbank and head of the Network for Greening the Financial System (NGFS), a global policy forum.

“In this regard it is natural that if you see a growing risk, a growing financial risk, that the interest of the central bankers is increasing,” she said in an interview with the Financial Times.

Her comments follow signs of disquiet among global finance officials about working on climate change, following the election of Donald Trump. The US president has described global warming as an “expensive hoax”.

The Federal Reserve quit the NGFS in January, claiming the global policy forum’s work had “increasingly broadened in scope” to cover issues outside the US central bank’s “statutory mandate”. US regulators have also called for financial rulemakers on the Basel Committee on Banking Supervision, the standard-setter for global financial regulation, to downgrade a flagship climate project.

The Financial Stability Board, the financial watchdog for the G20 that also has observer status at the NGFS, last week flagged disagreement among its members about whether it had already done “sufficient” work on climate, and said it would consider each year whether to pursue “any” more climate projects. Sabine Mauderer, head of the Network for Greening the Financial System, said: ‘Over the years, we realised that we [central bankers and supervisors] completely underestimated physical risk’ © ddp/STAR-MEDIA/Reuters Connect

The NGFS was founded by supervisors including the Bank of England, the Banque de France and the People’s Bank of China in 2017.

Despite the Fed’s departure from the network, Mauderer insisted it had continued to grow. The scenarios it examines underpin stress testing and analysis by dozens of central banks and supervisors, including Brazil, China and the EU.

Its latest analysis anticipates a 15 per cent hit to global GDP by the middle of the century from climate-related risks even if governments stick to existing emissions reduction policies. In this scenario, published in November, the effect on GDP from physical risks such as higher temperatures and rainfall had quadrupled compared with work carried out the previous year.

Every iteration of climate risk scenarios is likely to throw up more “severe” risk than previously thought as modelling techniques improve, Mauderer warned.



NGFS modelling does not yet account for risks linked to water scarcity, pollination collapse and mass migration, or those stemming from so-called tipping points — critical climate thresholds that can lead to irreversible changes to planetary systems.

“Over the years, we realised that we [central bankers and supervisors] completely underestimated physical risk,” Mauderer added. “We saw that it’s not just the global south that is affected by physical risk, but also advanced economies and the global north.”

The UN warned in a report last year that the world is on course for a “catastrophic” temperature rise of more than 3C above pre-industrial levels. The extreme weather events confronting countries across the world can push up inflation by disrupting food and industrial production, and fuel pullbacks in the insurance coverage that underpins much of the property market.