State should leverage the finance industry for green new deal - report


Ireland is now home to €3 trillion in funds under management, giving the industry the opportunity to leverage its firepower to take a leading role in the transition to environmentally sustainable finance, according to a new report.

As part of a shift to a "green new deal", central banks, regulators and the finance industry have come under pressure to adapt their practices to a rising tide of concern over environmental issues.

The report surveyed 33 central banks and regulatory authorities and found that 70pc of respondents consider climate change to be a major threat to financial stability.

"There is a significant opportunity for Ireland to use its global financial services industry to support climate change initiatives both here and internationally," said Mark Kennedy, managing partner at Mazars Ireland which commissioned the report along with the Official Monetary and Financial Institutions Forum (OMFIF) - a think tank for central banking, economic policy and public investment.

Ireland is the domicile for 5.4pc of worldwide investment fund assets and is now the third-largest global centre and the second largest in Europe with 17 of the top 20 global asset managers having Irish-domiciled funds, according to industry data.

"The most significant financial services businesses in banking, asset management and insurance are based here and positioned to support the European Green Deal objectives. This should be a key priority for our next Government," said Mr Kennedy.

Embedding environmental concerns in central bank and financial policy is relatively recent. Bank of England governor Mark Carney was viewed as highly controversial when he raised the issue as a major concern for financial stability in a speech in 2015.

Since then, a raft of central banks, including the Central Bank of Ireland (CBI), have signed up for environmental mandates, although the new report said there were still huge gaps in their regulatory framework.

The State has also raised money for environmental projects through the issue of "green bonds", raising €2bn late last year after a debut with €3bn in 2018.

The CBI is now part of the Central Banks and Supervisors Network for Greening the Financial System, a body that groups 54 banks and regulators. It was one of the institutions surveyed in the report.

"The CBI is researching how to adapt analytical models to incorporate the impact of acute and chronic climate change effects," it said in the report. "On the prudential side, the Central Bank has already suggested it intends to increase its focus on the adequacy of financial institutions' emerging risk management and disclosures."

The State lags behind, however, on key environmental pledges.

Ireland will miss its European Union commitments to cut carbon dioxide emissions by a wide margin and could face fines of up to €600m a year until it is back on track. The introduction of carbon pricing has been slow as the Government has been reluctant to alienate rural voters and the trucking industry.

Official data showed that Ireland generated 13.3 tonnes of CO2 equivalent for each person living here in 2017, the third worst performance in the EU.

Source – The Irish Independent