By William Oman

July 2019 was the hottest month ever recorded on earth, with countries across the world experiencing record-breaking temperatures. A prolonged drought is affecting millions of people in East Africa, and in August 2019 Greenland lost 12.5 billion tons of ice in one day.

A review of the literature by IMF staff aims to spur discussion of what policies to mitigate climate change could or should include. The review suggests that, while fiscal tools are first in line, they need to be complemented by financial policy tools such as financial regulation, financial governance, and policies to enhance financial infrastructure and markets, and by monetary policy.

The stakes are high. There is a broad scientific consensus that achieving sufficient mitigation requires an unprecedented transition to a low-carbon economy. Limiting global warming to well below 2 degrees Celsius requires reductions of 45 percent in CO2 emissions by 2030, and reaching net zero by 2050. Despite the 2015 Paris Agreement, greenhouse gas emissions are high and rising, fossil fuels continue to dominate the global energy mix, and the price of carbon, remains defiantly low, reinforcing the need for complementary policies.

The case for policy action beyond carbon pricing

Our review of academic and policy studies suggests that, currently, there are insufficient incentives to encourage investment in green private productive capacity, infrastructure, and R&D. At the same time, investments continue to pour into carbon-intensive activities. These undesirable economic outcomes prevent the needed decarbonization of the global economy. Decarbonization requires a transformation in the underlying structure of financial assets—a transformation that, studies suggest, is hindered by several deficiencies in the way markets function.

First, financial risks may not reflect climate risks or the long-term benefits of mitigation, given many investors’ shorter-term perspectives. Moreover, financial risks are often assessed in ways that do not capture climate risks, which are complex, opaque, and have no historical precedents.

Second, there is a wide gap between the private profitability and the social value of low-carbon investments. High uncertainty around their ability to reduce emissions, as well as the future value of avoided emissions, makes low-carbon investments unattractive to investors, at least in the short run.

Third, corporate governance that favors short-term financial performance may amplify financial “short-termism,” while constraints in capital markets can lead to credit rationing for low-carbon projects.

The above review of previous literature suggests that, because they directly influence the behavior of financial institutions and the financial system, financial and monetary policies can play a key role in addressing these issues.

Possible policy tools suggested by studies

The table below summarizes financial and monetary policy options for climate change mitigation, based on the above review of previous studies.

Policies that have been proposed in the literature can be divided into two categories: climate risk-focused and climate finance-promoting.

Climate risk-focused tools aim to correct the lack of accounting for climate risks for individual financial institutions and support mitigation by changing the demand for green and carbon-intensive investments, as well as their relative prices.

On the monetary policy side, examples include developing central banks’ own climate risk assessments, and ensuring that climate risks are appropriately reflected in central banks’ collateral frameworks and asset portfolios. On the financial policy side, tools include reserve, liquidity and capital requirements, loan-to-value ratios, caps on credit growth, climate-related stress tests, disclosure requirements and financial data dissemination to enhance climate risk assessments, corporate governance reforms, and better categorization of green assets by developing a standardized taxonomy.

Climate finance-promoting policies seek to account for externalities and co-benefits of mitigation at the level of society—that is, to account for how economic activity harms the environment but could instead, in addition to mitigating climate change, generate social value through, for example, reduced air pollution or more rapid technological progress. These policies could help shift relative prices and increase investments. However, the fact that they add new goals to existing policies makes them more controversial.

Monetary instruments to promote climate finance include better access to central bank funding schemes for banks that invest in low-carbon projects, central bank purchases of low-carbon bonds issued by development banks, credit allocation operations, and adapting monetary policy frameworks.

Financial policy instruments to actively promote climate finance revolve around “green supporting” and “brown penalizing” factors in banks’ capital requirements, and international requirements of a minimum amount of green assets on banks’ balance sheets.

What’s the bottom line?

More work is needed. The literature remains limited on the desirable package of measures to address climate mitigation. Nonetheless, financial and monetary policy tools can complement fiscal policies and help with mitigation efforts. All hands are needed on deck, for, as Mark Carney of the Bank of England has warned, “the task is large, the window of opportunity is short, and the stakes are existential.”

The writer is an economist at the International Monetary Fund, where he focuses on macrofinancial issues and climate change within the Monetary and Capital Markets Department.

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By Boipelo Manyowa

My name is Boipelo Manyowa, I am black, I am 28, I am an African, but I am ashamed to stand as a South African.

I think I am a pebble in the sea,  that is how small I am and probably how small my opinions matter in the ocean.

But I cannot as a human being, an African, a mother and a wife remain silent. In the last few days local criminals have run riot, attacking fellow black Africans in the name of fighting crime. Their method of dealing with crime has been to commit crime. (I will touch on this later)

The most unfortunate thing about all this is that, they have targeted the most vulnerable members of our community (yes, foreigners are a part of our community as long as they call our country home).

People who have travelled great lengths just to provide for their families are being targeted, beaten, stoned, burnt alive and their properties destroyed.

This is wrong on all levels.

A 100 years ago some of these borders did not even exist. European gangsters colonized our land and told us we are different. They divided us and shared our land among themselves as if it were slices of Pizza.

Years after defeating these racists, we now enforce their borders and their definitions of our forced differences louder than they do. Ironically, Chinese run several businesses with appalling working conditions for blacks. Eastern Europeans run criminal enterprises left right and center. These people are never called foreigners nor are they ever defined as different from us.

It hurts me because everywhere I have travelled first a young student, then as a budding businesswoman and later as a companion to my husband, I have been treated with so much love and respect.

From the warm streets of Lilongwe, to the clean ones in Rwanda and the mesmerizing ones in Nairobi, I have been loved and respected. I have lived in these places with an unshaking sense of peace and security, something I can only crave for my fellow Africans in South Africa right now.

My husband is 29-year-old Zimbabwean gentleman whom I have known since 2003 and loved for years. He is my pen pal who became my everything. He is a very complicated man of many talents and weaknesses in equal measure.

When he first came to South Africa, he was fleeing persecution by his government for his work. He is a journalist with an adrenaline addiction. He arrived in Pretoria with a dream, a dream that made me give up everything to be a part of.

Together we have seen all but one of the continents in this world. My family have grown to adore him, and he has made Zimbabwe a home for me, and a place I will be buried after my death.

More importantly my husband is responsible for over 20 children here in South Africa (and he will be upset I let this secret out). These children are South African and all but two are orphans. He does not make a lot of money (journalists are poor) but the little he makes he uses it to change lives.

Perhaps I should mention that my husband is no longer based in South Africa and only returns to perform critical business and rarely. The orphaned children in who look up to him have not been abandoned or left alone.

From the shores of the far east, he makes sure they are fed and clothed. He does not see these children as South African children but just children. He is not alone, and not an exception to the rule but much rather a norm.

I have had the absolute pleasure of living in Zimbabwe for a considerable amount of time too. I love the people there, their amazing culture and the serene beauty of the landscapes. My stay, as indeed my contact with many Zimbabweans has not always been pleasant.

I have been insulted, heckled, attacked, lied about, harassed, bullied among many other despicable things by strangers who do not know me but long made up their minds that I deserve to be hated. It’s not a lie that my nationality played some part in this too.

Comments asking for “that South African b*tch to be raped and killed together with Maynard Manyowa (my husband)” are something I deal with daily but have never gotten used to, though I refuse to let it affect me (I generally never allow other human beings to control my state of mind let alone emotions).

As you can see, I have had several unpleasant encounters with Zimbabweans, but I don’t recall being made to feel any less Zimbabwean (Yes, I am a Zimbabwean).

Despite all the abuse I have faced, I have never had Zimbabwean people attempt to set my business alight in Harare, or my car or my house.

To add to that, I have learnt over time, that the cruel and abusive hounds that dislike me and abuse me are just about a dime dozen. I can never allow a few rogue elements in a country of 18 million people (local and abroad) to define my relations with everyone else.

Zimbabweans, like Malawians, Zambians, Kenyans, Tanzanians, Sudanese, Congolese and Burkinabe people are among the warmest, hardworking and honest individuals I have ever met. As my experience has taught me with Zimbabweans (I interacted with them a lot) and Malawians (my husband works for and with Malawians), there are always bad apples out there.

I am saying this because am hoping my own brothers and sisters committing these acts know that crime has no nationality. I have been the victim of crime 4 times, and not once were my assailants foreign.

I grew up in the North West before moving to Pretoria. It’s simply not true that its only foreigners who commit crime. This evil scapegoating is wrong and really makes me hang my head in shame.

I also do not understand how people fight murder by killing people, stoning cars, or firing randomly at passing trucks. Is that not criminal itself?

I mean ever since all this began, the only people I have seen committing arson, robbery, malicious damage to property, attempted murder and assault are South Africans. The people they claim to be criminals, many of them poor, vulnerable women and children are only running for dear life. So, who is the real criminal there?

I am yet to see any drug lords busted in this crime spree. I am yet to see any real criminals arrested. All I see and have seen is desperate vendors, barbers, car guards, and cleaners being targeted.

A lot of what is happening right now makes me sick to the stomach. It also makes me hurt in deep places. Some of this just makes me angry too.

I am one of those people who just does not want to bear testimony to things I did not see so I won’t speak about the role other countries played in South Africa’s independence. I will speak as a human being with basic sense of compassion for others, as a black African who has called 9 African countries home.

Even as I write this, my heart is heavy, because, in places Hong Kong, far far away, where blacks are as rare as hen’s teeth, my husband and I have been allowed to settle, establish business, and exist on this planet without being made to feel like some kind of other.

What you are doing fellow South Africans is wrong. Whichever way you will want to justify it. You are the criminals and not the other way around, and I am ashamed that people look at me and think I too think like you – in such an evil, depraved and cruel manner.

Again, I think I am a pebble in the sea, that is how small I am and probably how small my opinions matter in the ocean. But you all need to reflect.

And as i look at this identity card, this document, that defines me as a South African, i am overwhelmed because my sense of patriotism is strong but i am ashamed of how my fellow citizens have tarnished what it means to be South African

Boipelo Manyowa is a Hong Kong based South African and the Executive Director of documentary journalism company MaynManFilms, investigative journalism website Khuluma Afrika among others. She writes in her own capacity

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