Central banks have more tools they can apply to help fight climate change, and green quantitative easing could be one of them.
So says Anne Richards, CEO of Fidelity International, who spoke on the panel “Reaching Net Zero – Activism and Collaboration” at the Green Horizon Summit at COP26.
Richards (pictured) said central banks have a lot of balance sheet power, and that’s one way to shift the relative cost of capital for green versus non-green activities.
“Thinking about capital rules, if you think carrots are better than sticks, rather than adding a capital charge for non-green loans, maybe giving capital adjustments in a positive way to further encourage green lending, these are the tools that central banks have.’
Besides loans, Richards said there might be more things they could consider in the future.
“Given the centrality of central bank policy and regulation to the entire financial system, the power that flows from it, I think, is immense.”
“There are a lot of tools that should be used with care, but there are some powerful ones that we haven’t applied yet.”
It’s time to act
Richards said the corporate sector has a big responsibility to act on climate change, especially because it is so difficult for governments around the world to come to a collective bargaining agreement.
“We can’t wait for the government, because governments just don’t act fast enough. We must take responsibility in all sectors to play our part and do what we can.
Richards also urged people to think about creating an appropriate transition roadmap that doesn’t end up eliminating all discussion from the political agenda.
She warned that there will be people affected in the short term by the higher costs of decarbonisation and others affected by the unintended effects of climate change.
The two groups are often among the least privileged in global society, but often do not vote in the same way.
“If higher costs are to be imposed on individuals and society, which inevitably must be the case, we must find a way to apportion what makes it affordable, otherwise it will be politically hijacked.”
“It’s really tough, it’s kind of like, ‘Lord make me good but not yet,'” Richards said. this opportunity in the debate.”