Senior risk analyst at the Central Bank of the Gambia backs green monetary tools, GFANZ tackles complex transition issues with new guidance, Oman releases landmark green finance guidelines, and more in the latest Green Central Banking roundup.
Joof: a green paradigm shift is needed at the Gambia’s central bank
A senior analyst at the Central Bank of the Gambia (CBG) has backed green capital requirements and subsidised interest rates as part of a proposed green paradigm shift.
According to risk management officer Foday Joof, the Gambia’s financial sector should integrate social and environmental returns, prioritising long-term societal value alongside financial returns. This shift is needed to address climate externalities in the country’s climate-sensitive economy, Joof explained in an article for Finextra.
“We must rethink our financial practices and regulations to build a greener and resilient economy. A sustainable financial system is not just an option; it is essential for the Gambia’s future. And CBG must steer this transformation by guiding banks toward responsible investments,” he said.
Joof put forward specialist funding facilities, subsidised interest rates and lower capital requirements as policies the central bank could adopt to support green projects. Additionally, he urged the CBG to adopt measures that promote green bonds and enhance climate risk regulations, including mandatory disclosures.
Separate research by Joof reveals that climate shocks triggered two of the Gambia’s six currency crises. For instance, the 2011 drought caused a 4.1% GDP contraction and a 30% depreciation of the Gambian dalasi against the dollar, underscoring the currency’s vulnerability to environmental factors.
GFANZ unveils new tools to align finance with net-zero and nature goals
The Glasgow Financial Alliance for Net Zero (GFANZ) has recently unveiled several initiatives that provide practical resources for financial institutions when addressing complex transition-related challenges.
The alliance has launched a consultation on integrating nature into financial institutions’ net-zero transition plans, which will be open to feedback until 27 January 2025. The guidance introduces the concept of “nature-related levers”, which are categorised as either specific natural climate mitigation projects or broader natural climate enablers such as low-carbon demand side alternatives.
A separate initiative focuses on developing transition-informed indexes to support real-economy decarbonisation. This second consultation, open until 9 January 2025, provides voluntary guidance for creating indexes based on companies’ transition potential and engagement.
GFANZ is also backing calls for regulators to classify finance for coal-plant phaseouts as transition finance. This recommendation comes from the Coal Transition Commission’s report launched at Cop29 and which features contributions from the GFANZ secretariat. The report addresses challenges faced by initiatives like Just Energy Transition Partnerships.
It suggests that recognising coal phaseout as a transition investment in taxonomies and other financial regulation and guidance, such as those of the International Sustainability Standards Board, could remove barriers to investment.
Oman issues new sustainable finance requirements for banks
The Central Bank of Oman (CBO) has unveiled sweeping new climate risk-related regulations that mark “an important step” towards greening its banking system, said executive president Tahir al Amri.
The measures outlined in a central bank circular require banks to integrate climate-related risks into their governance, strategies and risk management frameworks. The circular also announced the CBO’s commitment to developing a green taxonomy and incorporating sustainability into its macroprudential and supervisory policies.
The new rules mandate annual climate-related disclosures and semi-annual risk reports on indicators such as credit concentration in areas of high physical risk. Banks should also enhance their risk management capabilities and support customers’ transition strategies.
Implementation plans are due by 30 June 2025, with disclosure requirements taking effect on 31 December 2026.
Notably, the requirements apply to all banks including Islamic banking institutions, highlighting Oman’s broader efforts to integrate sustainability into its Islamic finance landscape. Researchers have suggested these developments could be key to unlocking sustainable finance across the Gulf Coast region.
ECB seeks feedback on revised banking supervision policies
The European Central Bank (ECB) has launched a consultation on its updated policies for supervisors when applying optional and discretionary aspects of EU banking legislation. Running until 10 January 2025, the consultation process aims to harmonise supervisory practices across the eurozone.
These updates cover the new EU banking package, including the capital requirements regulation and the capital requirements directive.
The draft framework is accompanied by an explanatory memorandum which summarises the updates under consultation. These include critical areas such as capital requirements calculations and banking group consolidation.
The ECB’s move is designed to enhance transparency, consistency and effectiveness in supervision, fostering a level playing field in the application of prudential rules
Bank of Namibia launches sustainability framework
The Bank of Namibia (BoN) has launched a sustainability framework to promote green finance and institutionalise sustainability principles at the central bank. Governor Johannes !Gawaxab, unveiled the initiative at a BoN-organised green finance event in October.
The framework outlines seven key principles, including integrating environmental considerations into monetary policy, investment decisions and financial regulation. It also promotes financial inclusion and stakeholder engagement.
This move is crucial for Namibia where over 70% of the population relies on climate-sensitive sectors such as agriculture and tourism, said Heather Sibungo, deputy minister of environment, forestry and tourism.
It also supports the country’s ambitious climate targets for 2030, including 70% renewable energy generation and a 91% reduction in greenhouse gas emissions.
The African Development Bank estimates Namibia needs US$5.3bn by 2030 to meet its green growth objectives.
This page was last updated December 19, 2024