Assessing the effectiveness and impact of central bank and supervisory policies in greening the financial system across Asia

The Paris Agreement established the importance of aligning financial flows with a pathway toward low-carbon and climate-resilient development. In response, central banks and financial supervisors have scaled up sustainable finance measures and are increasingly important stakeholders in climate governance. Due to the contemporary and evolving nature of the topic area, there is a knowledge gap regarding the efficacy of adopted measures and their environmental, social, and economic impacts. It is unclear whether sustainable finance measures are having the intended impact on the financial system and the real economy. Analysis is required to understand:

  • The full details of sustainable finance measures that have been implemented;
  • The rationales and processes underpinning their adoption; and
  • The effectiveness, efficiency, and equity of adopted measures, from the perspective of both financial institutions and supervisors.

We address this knowledge gap, focusing specifically on Asia, where many countries have adopted sustainable finance measures. Asia has global relevance as it contains many countries with the largest or rapidly increasing greenhouse gas emissions levels. We employ a sequential research design, utilising both quantitative and qualitative methods to collect primary data. Key elements of the research will be two written surveys with central banks and supervisors, and banking institutions, respectively, as well as detailed follow-up interviews with both groups.

Our research improves understanding of the progress made toward aligning financial systems and flows with the Paris Agreement. It will highlight cases where measures taken by central banks or supervisors have led to measurable positive outcomes, in terms of contributing to the transition to a low-carbon and climate-resilient economy or managing transition and physical risks. It will provide recommendations on data gathering by central banks to enhance their evaluation of the effectiveness of sustainable finance measures. It will provide policy guidance so countries can improve the design and implementation of existing and new measures, thereby enhancing the capacity of central banks.