Apontamentos de Fernanda Guardado no Pavilhão França da COP26

Question: How has the NGFS been useful to central banks and supervisors, but also to the financial community as a whole?

Good afternoon, Jean. Good afternoon to all. It is always a pleasure to talk about sustainability issues, and in particular on the importance of the Network for Greening the Financial System (NGFS) to central banks, supervisors, and, as a consequence, to the entire financial community. I am also proud to say that I am a member of the Board of a Central Bank that became member of the NGFS in 2020, and that brings sustainability as one of its strategic objectives. Let me start by saying that tackling climate risks and the massive challenges that come with them demands a global answer. Values such as information sharing, coordination, and the promotion of a better understanding on climate related issues are highly welcome, and it is precisely at these points that the NGFS has demonstrated one of its greatest merits. Since its launch in 2017, with only a few central banks kicking off a much-needed debate, it has grown to currently 95 members and 16 observers willing, on a voluntary basis, to share best practices and to contribute to the analysis and management of climate and environment-related risks in the financial sector, as well as to mobilize mainstream finance to support the transition toward a sustainable economy. In other words, we can say that it is difficult to talk nowadays about the role of central banks on the sustainability front without thinking about the NGFS.

After the publication of the April 2019 NGFS Comprehensive Report, members collectively acknowledged that climate-related risks are a source of financial risk and that more work on practical deliverables were needed. Among the report’s highly welcome recommendations, four were especially aimed at inspiring central banks and supervisors to take best practices on board:

• Integrating climate-related risks into financial stability monitoring and micro-supervision.
• Integrating sustainability factors into own portfolio management.
• Bridging the data gaps.
• Building awareness and intellectual capacity.

I can say that, despite already having a long tradition of supporting ESG initiatives and the environmental and climate-related agenda, these NGFS recommendations were great inspirations for the BCB’s Sustainability Strategic Dimension, in September 2020. Since its Comprehensive Report, the NGFS has focused on the follow-up of these recommendations and its resulting Guides have played an important role in this endeavor. The reports on climate scenarios are especially important for central banks, such as the BCB, who are developing their stress tests on climate risks, and the scenarios developed by the NGFS, on one hand, will help to develop comparable exercises across jurisdictions, but also allow sufficient flexibility for the scenarios to be adapted to each country specificity or relevant exercise. I would now like to focus on one of the most recent contributions of the Network, in which the Banco Central do Brasil actively helped to build: The Progress Report on the Guide for Supervisors.

This report brings practical guidance and case studies identified among NGFS members, showing great progress in the integration of climate and environmental risks into supervisory frameworks. Some recommendations have evolved quite positively:

• Development of a clear strategy, establishment of an internal organization and allocation of adequate resources to address climate-related and environmental risks; and
• Setting of supervisory expectations to create transparency for financial institutions in relation to the supervisors’ understanding of a prudent approach to climate -related and environmental risks.

This report identifies focus areas to better assist supervisors. Depending on progress made so far and specific needs, a supervisor can choose to dwell into selected focus areas, learning from the experience of others and deciding whether to adopt or adapt the good practices accordingly. The Progress Report also provides a deeper dive into a few identified areas, especially environmental risks and disclosure – both of them representing a less developed field in which the NGFS can help its members to understand better and deliver more concrete actions. This agenda is evolving swiftly, but further work is still necessary, especially in relation to data gaps, lack of harmonized methodologies and risk metrics, and insufficient internal capacity and resources. Through its current and upcoming NGFS initiatives, the Network can elevate not only supervisory capabilities and convergence of global supervisory practices, but the whole sustainability agenda, helping central banks and supervisory agencies to foster better and more tailored approaches for environmental and climate-related issues. And as central banks and supervisory agencies are beacons for national financial systems, a virtuous cycle will proceed.

Thank you very much.