18 October 2022 14:11
The Network for Greening the Financial System (NGFS) is a group of central banks, supervisors and observers committed to sharing best practices, contributing to the development of climate– and environment–related risk management in the financial sector and mobilizing mainstream finance to support the transition toward a sustainable economy.
Continued emissions of greenhouse gases since the industrial revolution have led to about 1.2 °C of global warming. While this change is seemingly small, current temperatures are unprecedented in at least the past 12,000 years and affecting living conditions in many parts of the world. If left unchecked, climate change will have profound impacts on ecosystems, health, infrastructure and the economy. Many countries have started to respond, putting net-zero targets and strategies in place to end their contribution to global warming. Such a transition can pose significant risk and would require substantial investment in every sector of the economy. New technologies and jobs would be needed to reduce energy use, eliminate emissions and restore land. This would present unique challenges and opportunities, particularly in regions that have urgent development needs today.
While the exact outcome is uncertain, it is foreseeable that some combination of these trends will occur. The next decade is set to be a critical period of change.
Launched at Paris “One Planet Summit” in December 2017, the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) aims to help strengthening the global response required to meet the goals of the Paris agreement and to enhance the role of the financial system to manage risks and to mobilize capital for green and low-carbon investments in the broader context of environmentally sustainable development. To this end, the Network defines and promotes best practices to be implemented within and outside of the Membership of the NGFS and conducts or commissions analytical work on green finance.
The NGFS also partnered with an expert group of climate scientists and economists from IIASA and PIK to design a set of hypothetical scenarios, which are available on the NGFS Scenario Explorer hosted on the IIASA server. They provide a comprehensive set of data and resources for understanding how climate change (physical risk) and climate policy and technology trends (transition risk) could evolve in different futures (here for more information).