We are currently in the midst of the most severe macroeconomic shock since the second world war. The disruption to our daily lives and subsequent impact on our economies has been enormous. We are seeing first-hand that a collective response is needed to defeat a common enemy, as authorities across the world courageously mobilise all available resources to fight the Covid-19 pandemic. This crisis offers us a once-in-a-lifetime opportunity to rebuild our economy in order to withstand the next shock coming our way: climate breakdown. Unless we act now, the climate crisis will be tomorrow’s central scenario and, unlike Covid-19, no one will be able to self-isolate from it. In the immediate response to the pandemic, governments have taken measures of unprecedented scale to keep economic and financial systems afloat. The IMF estimates that approximately $9tn of fiscal support has been provided across the world. This is necessary to limit acute and permanent damage. But as we consider the next stage of recovery, we must look beyond the immediate crisis and think more strategically about how we do it. Collectively, countries around the globe are still far from meeting climate crisis goals, most notably the Paris agreement to limit the increase in global temperature to well below 2C, and to pursue efforts to limit the increase to 1.5C. Over the last year, we have seen record temperatures across Europe, extreme rainfall in the US and wildfires in the Arctic. The effects of the climate crisis are irreversible, so the severity and frequency of these extreme weather events will only increase – by how much depends on our success in transitioning to a net-zero emission world. Recognising this risk, the Network for Greening the Financial System (NGFS) – a coalition of 66 central banks, and supervisors – has been working to “green” the financial system to reduce the costly financial risks that these developments create. Acting early will help to smooth... |