The Japanese central bank said on Friday that it would launch a special lending facility designed to help banks take action against climate change. It is a surprise move underlining the rising concerns among central bankers about the financial risks posed by global warming.
- The Bank of Japan (BoJ) said in a release that the scheme would “provide funds to financial institutions for investment or loans that they make to address climate change issues based on their own decisions” by the end of the year.
- Climate change “could exert an extremely large impact on developments in economic activity and prices as well as financial conditions from a medium- to long-term perspective,” it added.
- The Bank of Japan is the first major central bank to devise a lending facility especially focused on climate change.
- The European Central Bank and the Bank of England this year have launched special stress tests to assess exposure to climate risks in their banking systems, and the Federal Reserve in March set up two committees to evaluate the impact on “the broader financial system.”
The outlook: The BoJ is the first to take direct action, but political pressure and financial realities are pushing all of the world’s central banks to contribute to the fight against global warming – and devise solutions to help mitigate its impact while avoiding being accused of mission creep.