Central banks are increasingly aligning their pensions and portfolios to sustainable outcomes, according to a recent report published by INSPIRE, the International Network for Sustainable Financial Policy Insights, Research and Exchange. Alongside their financial stability remits, central banks are increasingly managing sustainability-related risks and aligning their activities with wider government commitments including net zero targets. The report highlighted eight key drivers, including systemic risks inherent in climate change, the search for better risk-adjusted returns, and the availability of resources and guidance. “Some of these drivers may be easier to incorporate in own portfolio management compared with pension portfolios, as they allow for own target setting and flexibility on responsible investing objectives which are more closely tied to fiduciary duty and regulatory restrictions,” the report said. Central bank awareness of growing stakeholder expectation and a desire to act as a “catalyst or as an example”, might also act as drivers for both portfolios, it said. However, the report said efforts are still in their early stages, with central banks’ progress to date “relatively muted,” as evidenced by low representation amongst signatories of the UN Principles for Responsible Investment.
"Central banks' progress to integrate responsible investment into their pension & own portfolios has been relatively muted compared with the wider public investor community."
— INSPIRE – Greening the financial system (@INSPIREgreenfin) May 25, 2022