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The Network for Greening the Financial System was launched at the Paris One Planet Summit on 12 December 2017. The Central Bank of Malta joined the network in July 2019. Ms Valerie Cutajar, principal expert in the Financial Risk Management Office, is one of the team representing the Bank on this important initiative.

What is the NGFS and what are the objectives of this initiative?

The chair of the network, Frank Elderson, recently explained the importance of this topic: "A transition to a green and low-carbon economy is not a niche nor is it a 'nice to have' for the happy few. It is crucial for our own survival. There is no alternative. Therefore, we need to come together and take action to create a bright, sustainable future."

Where do central banks fit into this? Climate-related risks are a source of financial risk and it therefore falls squarely within the mandates of central banks and supervisors to ensure the financial system is resilient to these risks.

Clearly, the mission of the network was timely and resonated around the world. Since its launch, the NGFS membership quickly expanded from its 8 original members to 42 members and 8 observers by July 2019, representing five continents, over half of global greenhouse gas emissions and the supervision of more than two-thirds of the global systemically-important banks and insurers.

Work has already started and the NGFS recently published a 'call for action' report which provides an overview of existing approaches to quantitatively assess climate-related risks and suggests ways for central banks and supervisors to assess them.

However, it also identifies key areas for further research. Going forward, the NGFS plans to offer more guidance to equip central banks and supervisors with appropriate tools and methodologies to identify, quantify and mitigate climate risks in the financial system.

Future deliverables include a handbook on climate and environmental risk management, voluntary guidelines on scenario-based risk analysis and best practices for incorporating sustainability criteria into central banks' portfolio management.

What is the Central Bank doing about climate change as an institution?

The Membership in the NGFS has encouraged the Bank to promote green initiatives in the financial system. There are already plans in the pipeline, for example, to increase the holdings of green bonds in the Bank's international portfolio as a first step. On the 26 of September, the Bank for International Settlements has launched a green bond fund for central bank investments in order to promote green finance. The Chief Investment Officer of the CBM was also member of the taskforce for the setup of this fund. The Bank has also participated in the Green Finance Summit in London that was held on the 2 July 2019 and is planning to participate in other conferences in the near future. Moreover, within the NGFS, the Bank will be involved in a number of tasks including research - and adoption of any proposals made.