Origin and purpose
The section provides information on why the NGFS was created and explains how the NGFS has created a forum for discussions and exchanges of best practices on climate-change for central banks and supervisors around the world.
At the Paris “One Planet Summit” in December 2017, eight central banks and supervisors established the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) in order to to help strengthening the global response required to meet the goals of the Paris agreement and to enhance the role of the financial system to manage risks and to mobilize mainstream finance in the context of environmentally sustainable development.
To carry its ambition as “a coalition of the willing” the NGFS works as a consensus-based forum, whose purpose is to share best practices on a voluntary basis, contribute to the development of environment and climate risk management in the financial sector, and conduct or commissions analytical work on green finance.
The NGFS now brings together over 160 Members and Observers (see Membership).
Climate change is source of structural changes affecting the financial system. However, it has a number of distinct characteristics that require specific considerations:
Considering current policies, global GDP losses due to climate change are projected to reach -15% by 2050 and around -30% in 2100. Climate-related risks are a major source of financial risk and it is therefore within the mandates of central banks and supervisors to ensure the financial system is resilient to these risks.
While the NGFS initially focused on addressing climate goals, the interdependencies between climate, biodiversity, and other planetary boundaries have made it clear that the resilience of the financial system relies on a holistic approach. The NGFS has thus been at the forefront of taking an integrated approach to nature-related risks.
Since its creation in December 2017, the NGFS has effectively contributed to bringing climate change (and now nature-related risks) into the financial agenda and has provided a forum for discussions and exchanges of best practices for central banks and supervisors around the world. The large range of topics discussed and the quality of the work produced by its members has made the NGFS a key player in the collective response to climate change.
In practice, central banks and supervisors can:
The prime responsibility for ensuring the success of the Paris Agreement rests with governments. However, the NGFS considers that by recognising the importance of climate-related financial risks as well as the macroeconomic dimension of climate change and the net zero transition, and accounting for these developments in their decisions, central banks and financial supervisors contribute to advancing the consistency of financial flows with the climate objectives of the Paris Agreement.
In 2021, at COP26, the NGFS committed with the Glasgow Declaration to expand and strengthen collective efforts to improve the resilience of the financial system to climate-related and environmental risks, and encourage the scaling up of the financing flows needed to support the transition towards a sustainable economy.
The “coalition of the willing” became the “coalition of the committed”. In 2023, the NGFS published the Dubaï Stocktake and renewed its commitment to accelerate the transition to a climate and nature friendly global economy. With the Cali-Baku Pledge to Enable Action, the NGFS pledged to enable action beyond its membership, by providing relevant knowledge and tools.
The NGFS has focused its work on operationalising central bank and supervisory agencies’ climate actions and has contributed to shaping a new way of addressing the climate challenge. It has improved the NGFS Scenarios every year and encouraged and supported climate scenario analysis and climate stress tests. The Network has also laid the foundation for robust climate change considerations into monetary policy strategies and frameworks as appropriate. It has explored emerging issues in the context of prudential supervision and has helped incubate the prudential approach to transition planning by financial institutions. It has deepened and broadened its work on mainstreaming climate across all central banking business lines and promoted better accountability in line with existing international disclosure standards. Its membership has also been active in building up capacity within the community of central banks and supervisors to take climate and nature into account in their activities and missions. Last but not least, the NGFS has brought to the forefront new issues in the financial system, like nature-related risks, which need to be assessed and addressed.
The work of the NGFS has fostered action by its members and beyond. Most NGFS members have taken concrete steps over the past years to turn identifying best practices into effective actions and policies in their own jurisdictions. The actual implementation has brought new insights and allowed others to learn from these experiences. This drive to turn knowledge and analytical work into action demonstrate the will and ability of the NGFS community to act as a leading force.
Updated on the 3rd of January 2025