Climate change and sustainable finance
Climate change is a major source of financial risk. As a result, the Banque de France has incorporated it into its missions and is supporting collective efforts to address the related challenges.
Climate change matters for central banks because it affects growth and price stability. This is why the Eurosystem is committed to taking full account of the implications of climate change for monetary policy and central banking. The Banque de France was a major contributor to the ECB strategy review, finalised in July 2021, which formalised this objective. It also continues to work within the Eurosystem to implement its shared action plan.
As part of their mission to preserve financial stability, the Banque de France and the Autorité de Contrôle Prudentiel et de Résolution (ACPR) work to better understand how French banks and insurers are exposed to climate-related risks. They also ensure that financial institutions are capable of addressing these threats.
“At the Banque de France and increasingly within the Eurosystem, we are driven by a simple but tenacious ambition: to do our utmost to support and add to the collective fight against global warming.”
The Banque de France contributed to the launch of the Network of Central Banks and Supervisors for Greening the Financial System or NGFS. The network groups together over 140 member institutions and helps central banks and supervisors to incorporate climate challenges and ensure they are properly accounted for by the financial sector.
The Banque de France (along with the ACPR) contributes to the NGFS, but also uses its research to build macro-financial scenarios for financial sector climate stress tests, improve its supervisory practices and responsible investment policy, and develop its climate reporting.
The Banque de France has also incorporated climate concerns into its services to the economy. It is examining ways of including climate risk in its company ratings system and has developed a prototype indicator to measure companies’ exposure and how well they manage these threats. As the steering body for France’s national financial literacy strategy (EDUCFI), the Banque de France also organises training and information sessions on sustainable finance for the general public (especially for students and financial professionals).
Since 2018, the Banque de France has applied a responsible investment approach to its proprietary investments. This covers two asset portfolios: its own funds portfolio and its pension liabilities portfolio.
The approach is built on three pillars, broken down into six objectives:
The Banque de France conducts research on climate-related public policies and on the economic and financial issues linked to climate change. Its aim is to improve its own actions in this field, but also to increase collective knowledge of the impact of climate risks on the economy, the financial sector and the financing of the low-carbon transition.
The Bank is developing a research agenda to be conducted by an internal “climate and green finance” network of researchers from its different departments. Since 2016, it has organised an annual academic conference on climate-related topics and, since 2018, has awarded an annual prize to young researchers working on green finance.
The Banque de France and the ACPR participate in initiatives at the European and international levels: Financial Stability Board, Basel Committee on Banking Supervision, International Association of Insurance Supervisors, G7, G20, etc.
As founding members of the NGFS, the Banque de France and ACPR contribute actively to the network's three objectives: to share best practices between peers, to contribute to the development of environmental and climate-related risk management in the financial sector, and to increase the financial sector’s commitment to the transition toward a sustainable economy. The ACPR is also a member of the Sustainable Insurance Forum which deals specifically with issues related to insurance.
Created in 2021 by the Banque de France, the CCC’s missions include:
The CCC's goal is to accelerate the inclusion of climate concerns in the Banque de France's activities, so that it can continue to act as a driving force with it partners, central bankers and supervisors.