Capital for Climate: Addressing Climate Change via Public Banks
Yamika Ketu, Associate Governance
Ceres Accelerator for Sustainable Capital Markets
Abstract
The shift to a low-carbon economy requires mobilizing not only private sector capabilities but also leadership from the state to direct the necessary investment towards green solutions. Public banks have long mobilized capital to instate transformational change. They have the ability to crowd in the finance that will make a low-carbon transition possible and their unique position in the economy offers a strong level of influence. To remain true to their mandate of price stability, which will inevitably be affected by the worsening climate crisis, central banks will need to apply all the policy levers they have at their disposal to push investment into green technologies. The policy tools utilized can drive the financial system to invest in climate innovation given the role of central banks in the overall financial system, and consequently facilitate the transition to the green economy. Furthermore, development finance institutions (DFIs) have the ability to incorporate green conditions in lending related economic development. This has positive implications for underserved communities as the financial support received from DFIs can improve economic conditions in addition to helping communities adapt to and mitigate the effects of climate change, especially considering the vulnerability of lower income communities to climate disasters.
