What does green banking mean at the intersection of pandemic and climate change?

What is it about?

There are many parallels between the COVID-19 pandemic and climate change. Both involve mounting public health threats, highlight massive economic uncertainties and inequalities, and have exposed the most vulnerable of us to the harshest blows. As the post-pandemic world is simultaneously facing the long-feared consequences of climate change in terms of financial shrinkages and transition risks, global decision-makers are focusing to align responses to these intersecting crises. The author of this piece outlines how central banks, which manage and control the global monetary circulation, are mitigating the financial risks associated with these calamities. The current efforts of the central bank community underscore the importance of immediate action, international cooperation, transitioning to a greener economic recovery, and accept-ing science-based calculation of global risks.

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Photo by Visual Stories || Micheile on Unsplash

Photo by Visual Stories || Micheile on Unsplash

Why is it important?

The effects of both the pandemic and global warming are most disastrous on the poorer nations and households. However, transitioning to a lower-carbon economy to combat these crises might further affect the economically vulnerable population. Thus, central banks should be appraised not only by counting their effort in developing newer financial instruments for a more sustainable economy but also in the context of the current redistributive challenges and asymmetric risk-return scenario associated with climate change. KEY TAKEAWAY The COVID-19 crisis has presented governments, financial institutions, and global policymakers with a unique opportunity to fight climate change. In this race against time, the collaborative approach should be directed to identify projects that can support sustainable and more inclusive recovery - a lesson extremely pertinent in the context of climate emergencies.