How can green central banking motivating commercial banks to develop green banking involving the provision of green loans financing the implementation of green economic ventures develop?
How can central banks inspire commercial banks to scale up the development of green banking?
How can central banks conduct green monetary policy?
Green finance, green bonds, green credit, green banking, etc. are all important issues of a green, sustainable closed-loop economy. Banks, by providing green loans, finance green, pro-environmental, pro-climate, sustainable economic projects, which are an important part of the green transformation of the economy, in which the building of a green, sustainable closed-loop economy is carried out. This process is becoming in many countries a strategic, key program segment of environmental, climate, energy, agricultural, transportation development, construction, waste management, nature resource management, forest management, etc. policies. This process includes a strategic plan to carry out a pro-environmental and pro-climate transformation of the classic growth, brown, linear economy of excess to a sustainable, green, zero-carbon zero-growth and closed-loop economy. The financial sector, including the banking and investment fund sector, is playing an increasingly important role in realizing the aforementioned green transformation of the economy. This is due to the need to allocate more and more money to green economic ventures. Besides, taking into account the rate of progressive climate change, including, above all, the accelerating process of global warming, it is necessary to significantly increase the scale of implementation of pro-environmental and pro-climate economic projects, which should result in a significant reduction in greenhouse gas emissions into the atmosphere, reducing the level of environmental pollution, reducing the scale of waste and consumption of natural resources, including the key resources for industrial development, non-renewable raw materials and clean water resources, which should be a renewable resource, but in the increasing area of land areas subject to drought is becoming a non-renewable and scarce resource. The scale of financing for green economic projects implemented in highly developed countries is insufficient in relation to needs, and in economically underdeveloped countries there is usually an even greater deficit in financing the green transformation of the economy. This issue is particularly relevant given that most of the economically underdeveloped countries are located in tropical, subtropical areas, in zones particularly vulnerable to permanent and increasingly frequent periods of severe drought and/or violent storms and downpours, rapid soil aridity and other negative effects of the ongoing process of global warming. In this regard, highly developed countries should increase the scale of financial assistance to less economically developed countries in order to support the financing of green economic projects that play a key role in the implementation of the green economic transformation plan. Because within the framework of international finance, internationally operating banks, i.e. the World Bank, the European Bank for Reconstruction and Development, the International Monetary Fund, which also finance green economic ventures to a certain extent, play an important role. Other key institutions in financial systems include central banks, which shape monetary policy, are banks of the state and banks of banks, influence the level of liquidity in the banking sector and the level of credit, investment, etc. risks taken by financial institutions and non-financial sector operators. Accordingly, central banks can also play an important role in the context of green finance, green financing, influencing commercial banks' lending activities of granting green loans and issuing green corporate bonds. In view of the above, central banks acting as a bank of banks vis-à-vis commercial banks can therefore motivate commercial banks to conduct green banking, including granting green loans and issuing green bonds. In the framework of what could be called green central banking, central banks could provide loans on preferential terms to commercial banks for the development of green lending, with the help of which pro-environmental, pro-climate and/or pro-environmental economic ventures would be financed, e.g. by financing the development of energy based on renewable energy sources, development of sustainable organic agriculture, improvement of waste separation and recycling technologies, development of electromobility, sustainable construction, development of green smart cities, construction of rainwater harvesting facilities, seawater desalination, reforestation of industrially degraded areas, etc. In the context of this issue, there is the question of possible opportunities and conditions for the creation of a strategy involving central banks conducting what could be described as a green monetary policy.
I am conducting research on this issue. I have included the conclusions of my research in the following article:
IMPLEMENTATION OF THE PRINCIPLES OF SUSTAINABLE ECONOMY DEVELOPMENT AS A KEY ELEMENT OF THE PRO-ECOLOGICAL TRANSFORMATION OF THE ECONOMY TOWARDS GREEN ECONOMY AND CIRCULAR ECONOMY
Article IMPLEMENTATION OF THE PRINCIPLES OF SUSTAINABLE ECONOMY DEVE...
I invite you to discuss this important topic for the future of the planet's biosphere and climate.
In view of the above, I address the following question to the esteemed community of scientists and researchers:
How can green central banking motivate commercial banks to develop green banking involving green loans that finance the implementation of green economic ventures?
How can central banks inspire commercial banks to scale up the development of green banking?
How can central banks conduct green monetary policy?
How can green central banking develop by motivating commercial banks to develop green banking, including green lending?
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I invite everyone to join the discussion,
Thank you very much,
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Dariusz Prokopowicz
The above text is entirely my own work written by me on the basis of my research.
In writing this text, I did not use other sources or automatic text generation systems.
Copyright by Dariusz Prokopowicz
Depending on the volatility of inflation rates, sensitivity of the economy towards the magnitude of investment in green banking, the central banks would reduce the discount rate for those banks that do green lending since the returns in that sector are longterm, the reserve requirement should be lowered, but for those that carry out green lending. It could look like discrimination, but it's a good discrimination if it doesn't spur inflation and dishonest borrowers (for example in developing economies). In the end, the inflation targeting should also be a priority.
Green central banking can motivate commercial banks to develop green banking by incorporating environmental criteria into lending policies, offering preferential rates for green loans, and providing regulatory incentives for sustainable practices.
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