In Conversation with Dr Priscilla S. Muthoora Thakoor (Governor, Bank of Mauritius)

1. When and why did your institution join the NGFS?

The Bank of Mauritius (Bank) was admitted as Member of the Network for Greening the Financial System (NGFS) in July 2020 as part of its commitment to systematically integrate climate-related and environmental risks into its regulatory, supervisory and monetary policy frameworks. The NGFS has played a pivotal role in advancing the global understanding of climate risks by bringing together cutting-edge research, best practices and policy recommendations. Its guidance and analytical work have provided invaluable support to the Bank in shaping and implementing its climate and sustainability agenda. Through its ongoing engagement with the NGFS, the Bank has capitalized on the collective expertise and practical experience of central banks and supervisors worldwide, thus enhancing its institutional capabilities while keeping pace with evolving international standards and best practices. This regular interaction is extremely beneficial to the Bank’s staff who actively participate in various NGFS task forces, workstreams and outreach sessions, contributing to discussions on key emerging issues at the intersection of climate change and financial stability. Our participation within the Network has also enabled the Bank to contribute to both domestic and international policy discussions by sharing its experiences and perspectives as a small island developing economy that is particularly vulnerable to the impacts of climate change. Collectively, these engagements have supported the Bank's efforts to foster a greener and more resilient banking system.

2. Can you share with us the key elements of the Bank of Mauritius climate strategy and how it fits into the broader national strategy in your jurisdiction?

As a Small Island Developing State (SIDS), Mauritius is highly exposed to the adverse impacts of climate change, including rising temperatures, more intense cyclones, flash floods, sea-level rise and ocean warming. In this context, climate resilience and sustainable development have become national priorities, as reflected in Mauritius’ revised Nationally Determined Contribution, which sets out ambitious targets for mitigation, adaptation and resilience building. Some of the country’s key targets include increasing the share of renewable energy in electricity generation to 60 per cent by 2035, enhancing water security, strengthening coastal protection, promoting climate-smart agriculture, and building resilience across vulnerable sectors of the economy. The implementation of Mauritius’ NDC targets would require a total of USD 5.7 billion for the period 2026-2035. However, the capacity of Mauritius to finance the transition to more sustainable development models is constrained by the level of public debt, relatively shallow financial markets and limited access to grants and concessional climate finance. Nevertheless banks' green exposures over the last few years have increased noticeably, supported to some extent by guarantees and credit lines under the European Union (EU)/ Agence Française de Développement (AFD) SUNREF program. Climate-related and environmental risks can have significant implications for the Bank’s statutory objectives of price stability and financial stability. Such risks must be addressed in a structured manner, and this is the reason why the Bank established the Climate Change Centre (CCC) in October 2021. The CCC is responsible for driving the Bank’s climate agenda through six key objectives: integrating climate-related and environmental risks into the Bank’s regulatory, supervisory and monetary policy frameworks; promoting sustainable finance; enhancing climate-related disclosures; building capacity and raising awareness for climate-related and environmental financial risks; bridging climate-related data gaps; and improving the sustainability of the Bank’s own operations. These objectives have translated into a number of concrete initiatives. For instance, the Bank published a Guide for the Issue of Sustainable Bonds in 2021 to support the mobilisation of capital for green investments. The Guide was complemented by the Sustainable Finance Framework for Mauritius, published by the Ministry of Finance in 2023. The framework which governs the issue of sustainable debt instruments by the government to finance projects aligned with our NDC commitments. The Bank has also strengthened the management of climate-related financial risks within the banking sector through the issue of a Guideline on Climate-related and Environmental Financial Risk Management, requiring financial institutions to integrate climate considerations into their governance, strategy and risk management frameworks, while enhancing transparency through climate-related disclosures. Financial institutions are encouraged to look beyond the risks posed by climate change and proactively leverage opportunities associated with the transition to a low-carbon and sustainable economy. I would like to seize this occasion to acknowledge the technical assistance received from the Banque de France this year to onboard climate risks in our on-site examinations of banks (here below two photos from the latest mission).

Recognising the need to develop a robust climate information architecture to foster sustainable finance, the Bank has collaborated with the Ministry of Environment, Solid Waste Management and Climate Change to develop a comprehensive database of climate risk drivers, for both physical and transition risks to support scenario analysis and climate stress testing. In addition, the Bank has sought technical assistance to conduct an assessment of the current institutional climate data framework and recommend practical actions to address the climate gaps in the short to medium term. The Bank has also collaborated with other stakeholders on the development of a National Green Taxonomy, which will be published in due course. Work is also under way to develop a national framework for the future implementation of the IFRS Sustainability Disclosure Standards (IFRS S1 and IFRS S2). Overall, the Bank’s climate strategy is closely aligned with the broader national climate agenda, and we will continue to leverage the NGFS to support the country’s transition towards a more resilient, sustainable, and low carbon future.

3. To which extent did the Bank of Mauritius leverage the work of the NGFS in its own domestic journey? Any concrete examples?

The NGFS has been an important source of guidance and expertise in our climate journey. The Bank has drawn on NGFS guidance notes, technical publications and capacity-building resources to deepen its understanding of climate-related financial risks, strengthen its supervisory and policy work, and support the development of sustainable finance initiatives. These resources have helped the Bank align its efforts with international best practices while tailoring its approach to the specific needs and vulnerabilities of Mauritius. A concrete example is the Bank’s Guideline on Climate-related and Environmental Financial Risk Management, which was published in April 2022, taking into consideration the NGFS Guide for Supervisors: Integrating Climate related and Environmental Risks into Prudential Supervision, along with other relevant international guidance. Our guideline also encourages financial institutions to consider climate scenarios developed by the NGFS, as part of their climate scenario analysis and stress testing exercises. We have also incorporated the NGFS short-term climate scenarios into our climate-macroeconomic model to assess their implications for key macroeconomic variables. In addition, the Bank has conducted a climate-related 3 scenario analysis exercise for the banking sector, using narratives based on the NGFS Sudden Wake-Up Call scenario, to estimate potential credit losses arising from climate-related risks. Going forward, the Bank intends to broaden its focus beyond climate risks to also incorporate nature-related risks into its regulatory and supervisory frameworks. In this regard, the Bank will continue to leverage the work of the NGFS, particularly its guidance and analytical work on nature-related risks, to better understand and assess the interlinkages between nature loss, climate change and financial stability.

4. One last word?

Mauritius experiences first-hand the effects of environmental vulnerabilities on the real economy and the financial sector. This perspective reinforces our conviction that addressing climate-related financial risks is a shared global imperative. Our size may define our geography, but it does not limit our ambition or our contribution to shaping the global conversation on sustainable finance. The NGFS tangibly demonstrates that collective action, shared knowledge and mutual learning are our strongest assets in building a financial system that is resilient, forward-looking and fit for the challenges of the future, especially for the most vulnerable countries. In that regard, the NGFS could consider the setting up of dedicated working groups for SIDS. These working groups provide a platform to share experiences, discuss common challenges and develop solutions tailored to our unique circumstances. I am convinced that, through continued collaboration and collective action, we can strengthen the resilience of our financial systems and support a more sustainable future for all.