Eroding U.S. leadership in the global fight against climate change is reflected rather depressingly in financial regulators’ inexplicable lag against international peers on attempting to get a handle on the matter.
This week though, there was progress. The Federal Reserve finally joined the Networkd for Greening the Financial System, a consortium of central banks focused on climate and the environment.
Fed Governor Lael Brainard on Friday laid out the case for why the issues fall well within the central bank’s policy mettle of financial oversight and risk assessment.
“We are already seeing elevated financial losses associated with an increased frequency and intensity of extreme weather events,” Brainard told a Brookings Institution webinar.
“Average annual insured weather-related catastrophe losses have increased over the past decade,” she added. “With losses increasing, insurers are incorporating the impact of climate change into their underwriting assumptions, pricing, and investment decisions.”
SEC Commissioner Allison Herren Lee spoke in even stronger terms.
“We’re seeing a growing recognition of the systemic risk that climate change poses,” she said during a panel at the same Brookings conference.
“There’s evidence that climate risks are currently not well understood and are underpriced, particularly with respect to long dated assets—utilities, commercial mortgage backed securities, potentially municipal bonds, among many others,” she said.
“We all know that underpricing can lead to abrupt and disruptive repricing as markets discover the anomaly. We may see cascading events that could trigger significant disruptive repricing.”
Herren Lee also made one key point that Brainard’s speech, which never mentioned fossil fuels, neglected: “It’s important to focus on financial institutions and their financing of carbon-producing activites.”
A report from the Rainforest Action Network earlier this year showed 35 major global banks pouring some $2.7 trillion into fossil-fuel investments in the four years following the 2015 signing of the Paris Climate agreement.
Japan’s economy to recover to pre-pandemic levels in 2022, Bank of Japan’s Kuroda says – The Globe and Mail
Japan’s economy will likely recover to levels before the coronavirus pandemic as early as March next year, Bank of Japan Governor Haruhiko Kuroda said on Monday, offering an upbeat view on its recovery prospect despite headwinds from COVID-19.
Kuroda also said a combination of expansionary fiscal and monetary policies have successfully stabilized Japan’s economy, signalling that the BOJ has offered sufficient stimulus for now to cushion the economic blow from the health crisis.
“Both fiscal and monetary policies have been successful in preventing corporate failures and unemployment,” Kuroda told a virtual meeting of the World Economic Forum.
“We expect, probably by the end of fiscal 2021 or early fiscal 2022, that Japan’s economy would recover and come back to levels before the pandemic started,” he said.
In its latest quarterly projections released last week, the BOJ expects the world’s third-largest economy to expand 3.9% in the fiscal year beginning in April, followed by a 1.8% increase in fiscal 2022.
The key challenge for policy-makers would be to prevent the pandemic from leaving a lasting scar on the economy, and to provide impetus to growth such as by promoting digitalization and a “green” economy, Kuroda said.
“Greening the economy…was important before the pandemic. But now it’s more important. It would make our economy more sustainable. At the same time, it would provide some growth impetus,” he said.
After suffering its biggest postwar slump in April-June last year, Japan’s economy has been recovering moderately from the pandemic thanks to a rebound in exports and output.
But a resurgence in infections has forced the government to declare a new state of emergency in January, threatening to cool consumption and push the economy back into recession.
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German economy to stagnate in Q1 – economist – TheChronicleHerald.ca
BERLIN (Reuters) – The German economy will stagnate in the first quarter of the year, Ifo economist Klaus Wohlrabe said on Monday, in the latest sign of the toll being taken by lockdown on Europe’s largest economy.
“The German economy is starting the year with little confidence,” Wohlrabe said, adding that delays in COVID-19 vaccine deliveries were adding to the uncertainty.
German business morale fell by more than expected in January as a second wave of COVID-19 brought to a halt a recovery in Europe’s largest economy, a survey showed on Monday.
(Reporting by Rene Wagner; Writing by Riham Alkousaa; Editing by Thomas Escritt)
Kenya's Economy Seen Growing This Year After Dodging Shrinkage – BNN
Kenya’s economy is expected to expand this year as activity resumes following Covid-19 lockdowns, boosting tax revenue and government spending.
East Africa’s largest economy is projected to grow by 6.4% this year and slow to 5.5% in 2022, with scheduled elections seen dampening activity, Treasury said in a report on its website. The economy is estimated to have expanded 0.6% last year.
“There has been an improvement in economic activity in the third and fourth quarters of 2020, albeit at a slow pace, following reopening of the economic, but pickup is weak,” according to the Treasury’s budget policy statement. The economy contracted by 5.7% in the second quarter of 2020, after growing 4.9% in the previous three months.
- The finance ministry expects government spending to rise by 3.2% to 2.968 trillion shillings ($27 billion) in the fiscal year starting in July. The fiscal deficit is seen at 7.5% of GDP, narrowing from an estimated 9% in the current fiscal year.
- The financing gap in the coming year will be plugged by net external financing of 345.5 billion shillings, or 2.8% of GDP, and net domestic borrowing of 592.2 billion shillings, equivalent to 4.7% GDP.
- While the economic shock from the Covid-19 pandemic has worsened Kenya’s debt indicators, the government is optimistic that the economy will recover and the debt position will improve.
- “Kenya faces a fiscal risk as the shilling continues to depreciate due to the fact that 51% of the debt is held in external currencies. This has led to increase in debt service budget in local currency and also increase on the stock of debt without inflows.”
- Lending to the private sector grew by 8.1% in the 12 months to November, it said.
©2021 Bloomberg L.P.
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