FRANKFURT (Reuters) – China has the world’s greenest central bank, followed by Brazil, both beating richer countries thanks to concrete steps such as lower interest rates on loans for pollution-fighting projects, an activist group said on Wednesday.

The UK-based campaign group Positive Money ranked the central banks and financial supervisors of G20 countries based on how much they are doing to fight climate change.

Only three of them got a pass: China, Brazil and France.

The results may surprise some as China, which got the highest rating in the report, is one of the world’s top polluters and Brazil has faced criticism for destroying parts of the Amazon’s rainforest.

But the authors of the study said financial policymakers in both countries acted earlier precisely because they faced larger environmental threats.

“This makes environmental impacts and risks more immediately visible and relevant for their central bankers and supervisors, and may result in a greater impetus to green their policymaking processes,” Positive Money said.

For example, the People’s Bank of China’s first green initiative dates back from 1995 and banks are now required to offer cheaper loans on environmentally friendly projects, the report said.

Brazil stands out for restricting financing for crop expansion in the Amazon and other vulnerable regions.

France, which largely derives its monetary policy and financial regulation from the European Union, narrowly beat its EU peers to the third place thanks to extra points earned through its own climate stress test of large banks and insurers.

This comes on top of steps taken by the European Central Bank, which has started demanding that banks take climate change into account when making loans and is considering adopting a green bias in its bond purchases.

The report mainly focuses on official policy and does not reflect efficacy in implementation.

(Graphic: How green is your central bank?

NO CONSENSUS

Central banks’ role in fighting climate change is the object of an increasingly lively global debate but so far there is no consensus on the way forward.

A report by a group of 89 institutions published last week found all policy options, such as skewing central bank funding to benefit green issuers or punishing polluters, have drawbacks.

A key issue is that engaging in climate policy would raise questions on two sacred cows of the past three decades: central bank independence from politics and its single-minded focus on inflation, coupled in some countries with employment.

Indeed, the Chinese central bank is not independent of its government while Brazil’s has only just been granted autonomy.

Positive Money advocated throwing such qualms to the wind because the costs of inaction would be more severe, and called for choking off funding to polluters.

“Targeting the most high risk and environmentally harmful assets —such as those linked to fossil fuel extraction— for exclusion from monetary policy operations and limits or penalising factors in prudential policy would be an important first step,” it said in the report.

(Reporting By Francesco Canepa; Editing by Marguerita Choy)