MNI INTERVIEW:Climate Change A Slow Pandemic For Central Banks

Central banks will find climate change disrupts the global economy in a way similar to the Covid pandemic, the head of the Toronto Centre that trains global financial supervisors told MNI.

“The climate crisis to me is like a pandemic that’s very slow moving, but you can’t either isolate or vaccinate your way out,” President Babak Abbaszadeh said on MNI's FedSpeak podcast. The Toronto Centre was created after the Asian currency crisis of the 1990s and this year the group has hosted events with Carmen Reinhart and the head of Ukraine's central bank, also training some of its senior staff who are moving in and out of military service.

Interest in climate risks has ramped up in the last five years, Abbaszadeh said, pointing to attention brought by former BOE and BOC Governor Mark Carney. Insurers have a head start because of their work identifying damage claims, Abbaszadeh said.

“If you could see me in action, let’s say five years ago as I was talking to various people about climate risk and climate action in the financial sector in the supervisory and regulatory sector, they would probably roll their eyes and push their chairs away,” he said. "We’re in a much better position than we were a few years ago.”

The Federal Reserve joined the Network of Central Banks and Supervisors for Greening the Financial System in December 2020.

FRONT LINE TRAINING

While the pandemic and the Ukraine war have tested global economic coordination and institutions, there has also been resilience and cooperation in areas such as sanctions against Russia, Abbaszadeh said.

“The stakes are very high especially with all the refugees outside of the country,” he said of training Ukrainian officials. “Some of them are coming back from the front lines” for this, he said.

When the Toronto Centre spoke with the Ukraine central bank chief in the spring, “the governor probably answered our questions in the bunker, we couldn’t really have a live interview like this, there was a lot of written answers,” Abbaszadeh said.

Dialogue with clients through the pandemic has underlined the need to plan for a crisis, even if you don't know exactly where market troubles will break out, he said. One major lesson in emerging markets is that different regulatory bodies in some countries lack regular lines of communication between themselves, he said.

“Never assume just because you have a plan, you can implement it,” he said. “A plan by itself is not very important, but that planning makes all the difference.”