How green is my central bank

Green climate and other bonds, and fixed-income assets do offer an explicit and ex-ante guarantee of carbon neutrality

Rathin Roy

The Bank of Finland has announced that its investment portfolio will be carbon-neutral by 2050. Reading up, I found many western central banks making similar announcements.
Puzzling. A central bank holds most of its investment portfolio in gold, and national and foreign cash and sovereign bonds. How would one judge whether bonds and cash assets were carbon-neutral? Gold, bizarrely, was excluded from the calculus of carbon neutrality apparently because there was no method to judge this. I find it inconceivable that gold mining is carbon-neutral, but let that pass.
The literature on the subject, putting it politely, completely misses basic tenets of government finance. Government revenues are not directly linked to expenditures. Governments do not spend to maximise tax revenue. This is equally true of debt-financed government spending. Even if such debt-financed spending is only used for capital expenditure, the portfolio of capital spending cannot b
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of or the Business Standard newspaper

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First Published: Sep 16 2021 | 11:12 PM IST

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