Connect with us

Banking

Hard for central banks to extend QE to fund green policies, ex-policymaker says

Hard for central banks to extend QE to fund green policies, ex-policymaker says 1

By Divya Chowdhury

MUMBAI (Reuters) – The era of monetary dominance is now passing, making it hard for central banks to extend their nearly decade-long “unlimited” easy money provisions to fund green policies, a former senior adviser to Bank of England Governor Mark Carney said.

COVID-19 has re-established the “efficacy of fiscal policy,” though policymakers are still debating over how much of that stimulus should be focused on supply-side measures versus demand-side, Huw Van Steenis told the Reuters Global Markets Forum (GMF) on Wednesday.

“I suspect there is far more to do on the supply side, but again I am encouraged (by) how many companies have pivoted over the last 18 months,” Steenis said.

Central banks around the world are figuring out ways to incorporate climate change and extend quantitative easing (QE) to fund green policies.

Two policymakers told GMF the onus of promoting sustainable investments https://reut.rs/3kvgWhj should lie with governments and not central banks https://reut.rs/3DARRdA.

Steenis, who is currently chair sustainable finance at Swiss bank UBS, said he believed central banks still had a legitimate role to play in maintaining financial stability and market integrity as the transition to sustainability continues.

“Transparency in the data and climate stress tests may prove to be the most catalytic tools,” he said.

Global green bond market, by country https://graphics.reuters.com/BOJ-CLIMATE/SHIRAI-GMF/lbvgnnmkbpq/chart.png

The European Central Bank (ECB) is considering tilting its purchases of corporate bonds towards companies that pollute less or are cutting their emissions.

But Steenis, who is also senior adviser to the chief executive of UBS, thinks it’s difficult to get that “strong tilt.”

“How would the ECB or others make very aggressive exclusions, given the composition of indices,” he said.

Steenis said industries need finance, and shouldn’t be penalised for not tilting, so that entire economies can transition.

“Helping them finance the transition is key – with some engagement from asset owners where they see a firm is lagging.”

Central banks will likely use “green tilt indices and top up with green bond purchases … to signal the direction,” Steenis said.

(This interview was conducted in the Reuters Global Markets Forum, a chat room hosted on the Refinitiv Messenger platform. Sign up here to join GMF: https://refini.tv/33uoFoQ)

(Reporting by Divya Chowdhury in Mumbai; Additional reporting by Aaron Saldanha in Bengaluru; Editing by Steve Orlofsky)

Editorial & Advertiser disclosure
Our website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.
Global Banking and Finance Review Awards Nominations 2021
2021 Awards now open. Click Here to Nominate

Recommended

Newsletters with Secrets & Analysis. Subscribe Now