Sustainable investing taking hold at central banks, report finds

A report by INSPIRE has found that central banks are increasingly aligning their pensions and portfolios to sustainable outcomes, in the growing shift to sustainable investing.

INSPIRE – the International Network for Sustainable Financial Policy Insights, Research and Exchange – found that central banks are increasingly looking to ‘align their operations with sustainability objectives within the constraints of their mandates’.

According to Regulation Asia, alongside their financial stability remits, the report found that central banks are increasingly managing sustainability-related risks and aligning their activities with wider government commitments including net zero targets.

The report also detailed eight key drivers – including systemic risks inherent in climate change, the search for better risk-adjusted returns and the availability of resources and guidance.

The report said, “Some of these drivers may be easier to incorporate in own portfolio management compared with pension portfolios, as they allow for own target setting and flexibility on responsible investing objectives which are more closely tied to fiduciary duty and regulatory restrictions.”

It also found that central bank awareness of growing stakeholder expectation and a desire to act as a ‘catalyst or as an example’ may also act as drivers for both portfolios.

However, the report said that efforts ‘are still in their early stages’ with central banks’ progress to date relatively ‘muted’, as shown by low representation amongst signatories of the UN Principles for Responsible Investment.

The European Securities and Markets Authority (ESMA) recently released a Supervisory Briefing, aimed at ensuring convergence across the EU in the supervision of investment funds with sustainability features.

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