M. Mora: Boj s klimatickou změnou ohrožuje nezávislost centrálních bank

Centrální banky by neměly vyvolávat dojem, že jsou všemocné. Řešení klimatických cílů nebo cílů udržitelnosti prostřednictvím finanční regulace, zejména obezřetnostní regulace je velmi rizikové, říká v rozhovoru viceguvernér M. Mora. Podle něj zde platí dvojnásob, že cesta do pekel je dlážděna dobrými úmysly. Centrální banky by se měly soustředit na dosahování svého hlavního cíle, cenové stability. (video včetně anglických titulků)

Audio (mp3, 41 MB)

Obsah dílu:

  • 00:31 Zelené finance jsou součástí širšího konceptu udržitelných financí. Co vlastně jsou udržitelné finance a čeho se týkají?
  • 03:31 Proč v posledních letech dochází k tomuto vývoji?
  • 05:00 Jak významný je tento trend?
  • 05:40 Skýtá to nějaká rizika?
  • 09:46 Jak hodnotíte tento vývoj z pozice centrálního bankéře?
  • 11:31 Co je a není zelené, stanoví tzv. taxonomie, která by měla být pro EU brzy schválena. Pomůže to zpřehlednit situaci?
  • 12:40 Platí, že je-li nějaký projekt „zelený“ znamená to, že je i méně rizikový?
  • 14:32 A jaká je ta druhá oblast, která je důležitá z pohledu centrální banky? Tj. ty přímé nákupy tzv. „zelených“ aktiv CB?
  • 15:57 Politický cíl snižování emisí skleníkových plynů je tedy něco, co některé centrální banky dělají dobrovolně a nikoli na základě zákonného mandátu?
  • 18:29 Ohrožuje to tedy politickou nezávislost CB?
  • 20:32 Závěrečné shrnutí

English transcript:

Hi, Marek. Welcome.


Marek, green finance is a part of the broader concept of sustainable finance. Can you tell us what sustainable finance is and what it covers?

Sustainable finance covers three basic areas. It is also sometimes called ESG finance, where the letters ESG stand for the three largest areas.

The first is the environmental area, which includes environmental protection, the fight against climate change and the fight against pollution.

The second is the social area, covering, for example, employees’ working conditions and human capital.

The third is governance, such as managers’ pay, transparent accounting, ethics and the currently topical issue of gender balance.

So, these three goals – collectively called sustainability – are pursued at the corporate level, and sometimes also at the government level. They are espoused these days by manufacturers, service providers, investors, financial service providers, banks and others. So it’s a trend that now encompasses the entire economy.

The trend in this area can be well documented with some figures. For example, we are seeing very fast growth in green bonds, that is, bonds meant to contribute to achieving the first goal, the environmental one. You can see that such issues amounted to more than USD 200 billion in 2019. In the past five or six years, the total volume of green bonds has exceeded USD 1 trillion.

Sustainable assets under management are also growing quite rapidly. They amounted to more than USD 850 billion in 2019. It’s important to mention that these figures represent just a few per cent of the total assets under management.

If we look at the number of funds with a sustainability mandate, it, too, is increasing quite fast. It’s a fairly dynamic area covering the entire economy and financial sector.

Why have we seen such a trend in recent years?

That’s a very interesting question. It seems that private entities – consumers, firms and employees – want private companies to help achieve these goals.

It’s as if the statement that a company’s biggest – and actually only – social goal is to generate profit, made years ago by the renowned US economist and Nobel Prize winner Milton Friedman, were no longer true. Nowadays it seems that firms are pursuing other goals, the ones we mentioned.

We can look at this as an activist approach. But we can also view it as optimum risk management, with firms, consumers and investors believing that, by achieving those goals, they will also make a profit in the long run.

The growth in sustainability has also been strongly supported by the recent wave in the fight against climate change, especially in the wake of the Paris conference on climate protection in 2015, which emphasised the green component of sustainability.

Marek, how important is this trend?

I think it’s very important. I think it’s a factor that might be fundamentally affecting the financial sector.

However, in my view it’s also changing the entire liberal market economy – capitalism, if you like – as we’ve known it for the past 150, 200 years. As I said, firms are no longer just maximising their profits, but also trying to achieve sustainability goals, which are also sometimes called social accountability goals.

Does this pose any risks?

I think there are a few downsides to this trend. I’d mention three.

The first area one can be critical of is greenwashing. Sustainability is a new trend and is currently in quite high social demand, so some firms are pretending to contribute to achieving the goals but are making no big changes in reality. They are striving to appear green but aren’t very green in reality. It’s just marketing, sometimes called greenwashing.

The second area of criticism is that I think there’s a lot of hypocrisy running through the world of sustainability. First, I think it’s hypocritical that the biggest supporters of these sustainability concepts are firms that have made huge profits from extracting, producing and processing fossil fuels. They’re now the biggest advocates of sustainability.

The second hypocritical aspect is that green mobility, electromobility, needs batteries to fuel electric vehicles. Those batteries are made, among other things, from cobalt. And cobalt is mined under very harsh conditions, as you can see in these photos. More than 50% – almost two thirds – of cobalt is mined under very harsh conditions in the Democratic Republic of Congo, where, as you can see, child labour is used in cobalt mining.

This, I think, is an aspect which is not being discussed in connection with electromobility. The debate is centred on the green aspect, while the social and governance areas are not being discussed, although I think they are very worthy of debate. That’s the second hypocritical aspect.

The third such area worth discussing in relation to sustainable finance is whether or not such finance delivers higher yields. In the past, economists thought that the return on sustainable finance was lower, so there was a need to emphasise its long-term aspects. I think the short-term rates of return were lower, hence the focus on the long term.

By contrast, there have recently been economists saying that ESG assets generate higher yields. I’ve been studying this issue for quite some time. Perhaps the best study on the topic is an IMF one which shows – here in this chart on the right – that there is actually no link between the degree of sustainability and the returns on these assets. It contains a rather chaotic cluster of dots with no clear link between the rate of return and sustainability.

I would also perhaps briefly comment on the chart on the left. It shows that if you use different metrics to measure sustainability, you can arrive at different conclusions. Those dots should form a straight line. In the chart you can see on one axis how sustainability is measured using one measurement approach, while the other axis uses another measurement approach. We can see no direct correlation between them.

This, among other things, supports the greenwashing argument – you can brand yourself as green, but maybe you aren’t really so.

Thank you, Marek. Let’s now move on to central banking. Tell me, how do you assess this trend as a central banker?

So far, we’ve discussed the trend in the private sector, where there’s a certain level of supply and demand for these sustainable assets. We’ve spoken about the fact that the whole process takes place using some form of voluntary self-regulation. Of course, this is something we have to take as given.

However, there are essentially two areas I have strong reservations about as a central banker. The first is financial regulation. I think it’s a big problem when we start using financial regulation to achieve climate objectives.

It goes without saying that the aim of financial regulation is to achieve financial stability and that in order to achieve financial stability the risks arising from climate change should be taken into account. That’s clear.

But the moment we start in some way to favour projects which help fight climate change by reducing the capital or the capital requirements applying to banks which finance these objectives, or conversely we disadvantage those banks by increasing their capital or even by prohibiting them from supporting activity that is unsustainable, or “dirty” or “brown”, then I think we may end up creating more problems than we solve.

A taxonomy that we expect to be approved soon for the European Union determines what is and what isn’t green. Will it help clarify the situation?

That is of course the underlying objective of the taxonomy – to determine what contributes to sustainability and the fight against climate change and, by contrast, what does not, or what jeopardises it. However, the question is to what extent it will be successful.

On the one hand, I believe the taxonomy may be driven partly by political motives. On the other, the world is a very dynamic, ever-changing place and the question is whether there’ll be a place in the future for something like, say, nuclear power or internal combustion engines, which nowadays can be very efficient and have very low carbon dioxide emissions.

So, in my opinion, the main problem is that we won’t know whether things that will be sustainable in the future will ultimately really fulfil these objectives.

And is it true that if a project is green, it’s also less risky?

That’s just it. This is what I was talking about a moment ago. If prudential requirements, especially in banks, were actually to be regulated based on whether a project is green or not, we might on the one hand overlook other risks, ones that are not sustainability risks.

On the other hand, sustainability itself may not be optimally assessed for the reasons I mentioned. And then, instead of solving a problem, we might cause one, or distort the market even further.

Let’s not forget, for example, that the last great financial crisis, which originated in the US, was also related, among other things, to a property market bubble, and that one of the causes of the bubble was that the US government supported the availability of owner-occupied housing. So, it also contributed to some extent to the creation of the bubble and was partly responsible for causing the financial crisis. A whole range of other factors were also at play, but that can happen.

So I believe that giving climate risks preferential treatment can lead to other risks being overlooked, risks which themselves can lead to financial instability. So in my view, it’s very risky to use financial regulation to achieve financial stability goals.

In my opinion, the contention that the road to hell is paved with good intentions is doubly true in this area.

Marek, what is the second area you consider important for central banks? Is it the outright purchase of green assets by central banks?

Yes, that’s the second area I’d be very critical of – the direct involvement of central banks in contributing to the achievement of sustainability goals or in the fight against climate change.

In a way I find this somewhat incomprehensible because I believe that modern central banks were established to achieve the objective of price stability. Price stability is seen as something which contributes to long-term economic sustainability.

At the same time, historical and empirical facts have shown us that the best way to achieve the objective of price stability is with an institution that is apolitical and independent, i.e. a central bank.

But central banks have huge power. They issue money, create money. Money, as we know, is the blood of the economy. It has enormous power, massive influence, and if central banks were to start using this power, their power, for objectives other than stabilisation, I believe they would end up skating on very thin ice.

So, the political objective of cutting greenhouse gas emissions is something that some central banks do voluntarily and not on the basis of their statutory mandate.

Yes, it’s essentially something that many central banks advocate of their own accord because they consider those objectives important or, I’d even say, noble.

But I see a number of big risks to taking such an approach. One risk is that the whole area of combating climate change may become very controversial over time. As soon as it starts to affect us more, it will impact on prices – prices of energy and the like. The moment climate change and the fight against it becomes politically contentious, the potential involvement of the central bank in this area may also become politically contentious.

On the other hand, if central banks buy green assets, which is what is being discussed in the European Central Bank for example, after a while politicians or even the public may say that the central bank could wipe these assets from its balance sheet, in effect forgiving the debts of debtors from whom the central banks bought the financial instruments, and, in doing so, help to fight climate change.

Perhaps this sounds a little absurd, but let’s look at current developments at the European Central Bank. It is engaging in the large-scale purchase of government bonds in particular, but also of corporate bonds. We have already heard Italian and now even Spanish politicians say something along the lines that the European Central Bank should help rid Italy and Spain of their debt by writing off that debt. The same thing could happen in the future with environmental debt, if you want to call it that. I would also consider this a big risk.

The third area that I think could prove very problematic is that sooner or later politicians may also start to call on central banks to contribute to the fulfilment of other objectives. This is an area where I think that we, as central bankers, should be very cautious.

Do you think this may jeopardise the political independence of central banks?

I think it could, because by behaving in such a way we would be calling into question our own legitimacy. We would be challenging the reason we, as central banks, were created.

As I said, the original goal of our high level of independence was that we would only strive for price stability and only have a stabilising role. The moment we were to enter such processes as allocating funds to a certain sector to fight climate change, I think this would clash with our original legitimacy.

It’s also good to realise that the central banks which do take such action, sometimes say it’s because climate change has a big impact on how we operate, on monetary policy, financial stability and so on. This is undoubtedly true, it’s a big risk.

Yet we face many such risks affecting prices of financial assets or even non-financial assets. There’s demographics, which undoubtedly have an impact on both monetary policy and financial stability. There’s all the trends in information and communication technology, artificial intelligence, globalisation itself, the emergence of China and the big influence it is having. All these factors are also contributing to price change in the economy, changes in asset prices on so on. Those who finance firms and consumers have to pay attention to these trends. They have to factor them into their calculations. So, there is a risk here.

But central banks don’t try to solve the problem of demographics and don’t try in any way to fight or influence globalisation. So why should it be any different for climate change? Why should we combat climate change?

We have to consider it as one of the risks facing us. But we’re not here to try to solve this risk in any way or to fight climate change.

So, Marek, to conclude, how would you like to sum up?

I believe that central banks should not give the impression that they are all-powerful to the public, economists or anyone else, or that they are able to solve all the problems of humanity, no matter how important or noble those problems are.

A central bank has a clearly defined objective, as I mentioned, and should leave everything else to democratically elected governments. Central banks should therefore explain properly what they are established do to and what they are not established to do.

In my view, climate change does not fall into the remit of central banks in any way. It is one of the risks we should monitor, but, as I said, as a central bank, we shouldn’t try to influence this trend.

In my view, combating climate change affects the legitimacy of the central bank. In a way, it also affects its independence and thus its ability to achieve its primary objective of price stability.

I believe that those who fail to understand this don’t understand what a central bank is.

Thank you for the interview, Marek.

Thank you for the invitation, it was my pleasure.

Many thanks to you, our viewers and listeners, for your attention. A reminder that you can follow us on social media.