As central banks increasingly incorporate global warming risks into their work, the Bank for International Settlements (BIS) has launched a new green bond fund.
The BIS’s green bond fund initiative aims to help central banks incorporate environmental sustainability into their reserves and capital management efforts.
“The funds promote green finance through sizeable investments in environmentally friendly projects such as renewable energy production and energy efficiency, and support the adoption of best market practices and reporting standards to deepen the green bond market,” the BIS said in a release.
The BIS first launched a U.S.-dollar denominated green fund in 2019, which combined with its new Euro-denominated fund will manage approximately US$2 billion in green bonds for central banks.
The funds, which were developed with the support of an advisory committee drawn from central banks, are managed in-house by BIS Asset Management.
To be eligible for the funds, bonds must have a minimum credit rating of A- and comply with global green bond principles.
The European Central Bank (ECB) announced that it’s participating in the new BIS fund as part of its effort to increase the share of green securities in its portfolio.
“Central banks around the globe have continued to support this joint green bond fund initiative and channel funds into the green bond market through the BIS,” said Peter Zöllner, head of the BIS banking department.
At the same time, the ECB said that it’s taking steps to increase sustainable investments in its staff pension fund, and that it will set up an internal unit focused on climate change to consolidate its work on climate issues in different parts of the bank.
The new unit, which will lead the ECB’s climate agenda, will report directly to the ECB’s president, Christine Lagarde.
“Climate change affects all of our policy areas,” said Lagarde in a release. “The climate change centre provides the structure we need to tackle the issue with the urgency and determination that it deserves.”