A network of central banks and financial supervisors seeking to accelerate the scaling up of green finance has called for three policy interventions to catalyze progress towards better climate-related data.
In a report released this week, the Paris-based Central Banks and Supervisors Network for Greening the Financial System (NGFS) says the three “building blocks” include convergence towards a common and consistent set of global disclosure standards and a minimally accepted global taxonomy.
The NGFS also calls for the development and transparent use of “well-defined and decision-useful” metrics, certification labels and methodological standards.
“Reliable and comparable climate-related data are crucial in order for financial sector stakeholders to assess financial stability risks, properly price and manage climate-related risks, and take advantage of the opportunities arising from the transition to a low-carbon economy,” says the report.
“Persistent gaps in climate-related data hinder the achievement of these objectives.”
The 51-page report represents the preliminary findings of a group set up by the NGFS last year to map gaps in climate-change data and propose ways to bridge them. A final report is scheduled towards the end of the year.
Need for more forward-looking and granular data
“Stakeholders report the need for more forward-looking data (for example, targets or emissions pathways) and granular data (for example, geographical data at entity and asset levels),” the report says. “Stakeholders are also calling for assurance about the quality of climate-related data through verification and audit mechanisms, as well as improvements in data accessibility.”
But global progress on the building blocks should not prevent better leveraging of existing data sources and approaches – such as proxies and estimates, qualitative approaches and capacity building – or promoting new data tools.
“The NGFS will continue its evidence-based identification of the most prevalent data gaps – including by further engaging with other stakeholders such as non-financial corporates, data providers and ratings agencies – and issue recommendations on how to bridge them,” it says.
The report notes that many stakeholders consider taxonomies as a prerequisite for consistent collection of data and comparable analysis.
“Different jurisdictions are establishing different, separate taxonomies for green finance,” it says, highlighting the need for cross-regional discussion.
“There is a need to intensify and coordinate the development of taxonomies across the globe, and to examine the possibility of harmonizing them over time."
Limiting the global taxonomic scope to climate change – as opposed to other issues like biodiversity – “may be a pragmatic way forward”.
Comparing European and Chinese taxonomies
The report highlights work by the International Platform on Sustainable Finance to compare European and Chinese taxonomies for environmentally sustainable investments to identify common and different approaches, criteria and outcomes.
Frank Elderson, the European Central Bank (ECB) board member who chairs the NGFS, says the lack of good quality and readily accessible data "has been a challenge for central banks, supervisors and financial sector participants alike”.
The interim report “lays the groundwork for a comprehensive stocktake of the data needs and identifies ways to further bridge gaps”, Elderson says.
Patrick Amis, the ECB director general of specialized and less significant institutions who co-chairs the NGSF group set up last year, vows to “continue engaging with multiple stakeholders to further progress along the three building blocks”.
Providing climate and environment-related data “goes beyond financial sector participants and requires swift progress on disclosures, global taxonomy and transparent and quality-assured metrics”, he says.
Fabio Natalucci, deputy director of the International Monetary Fund’s monetary and capital markets department who serves as the group’s other co-chair, stresses the "urgent need” to strengthen climate information architecture.
“Reliable and comparable data are a crucial component,” he says. “Decision-useful information is essential for the assessment and pricing of climate risks and for the mobilization of private finance necessary to transition to a more climate-sustainable economic model.”
Established in 2017, the NGFS comprises 90 central banks and supervisors along with 14 observers which represent about 85% of global greenhouse gas emissions. The network is run out of a secretariat at the Banque de France.