Bankers and politicians urged to jointly address climate change impacts

Central banks can play an important role in helping governments respond to the socio-economic challenges posed by the increased threat of climate change but they need the government to create enabling policies.

This was the general message emphasised during the 57th SADC Committee of Central Bank Governors Meeting held at Swakopmund on Friday.

In her keynote address, prime minister Saara Kuugongelwa-Amadhila drew attention to the severity of climate-induced challenges like natural disasters, droughts and food insecurity, which have also deeply impacted Namibia.

“The effect of the El Nino phenomenon has caused severe food insecurity, which require public resources to address.”

Kuugongelwa-Amadhila also highlighted the government’s commitment to the drought relief programme for the next nine months.

She argued for the vital contributions central banks can make, not just in macroeconomic stability but also in climate change mitigation.

“Central banks can play a crucial role in crafting innovative, modern and secure solutions for enhanced financial inclusion and cross-border payments,” she said, adding that central banks “will continue to do their part and execute their respective mandates with diligence, while contributing to advising governments on various aspects of the economy”.

Furthermore, she described the symbiotic relationship between the government and central banks: “Whereas government and central banks play different roles in the economy and central banks operate autonomously, independent of political influence, there is complementarity between the roles of government and central banks.”

Bank of Namibia governor Johannes !Gawaxab echoed Kuugongelwa-Amadhila’s sentiments, warning that “financial conditions are tightening, economic problems are mounting and global efforts to reform the market order are gaining momentum”.

“On top of that, climate change brings with it a multitude of risks, including droughts, fires and floods in our region,” he said.

!Gawaxab referred to a 2022 United Nations report that indicated that Africans lose between US$7 billion to US$15 billion annually due to climate risks.

To mitigate this risk, about US$128 billion is needed, however, the current funding falls short of this requirement, with only US$24 billion to US$28 billion being raised annually.

He emphasised the “urgent need for concerted efforts to mobilise financing”.

Sabine Mauderer, executive board member of the Deutsche Bundesbank and vice-chairperson of the Network for Greening the Financial System, noted that climate change directly impacts the core duties of central banks.

She said “central bankers are no politicians” and their role is not to set up climate policies.

“We have to play our role within our mandate.

We have the analytical capacity, the economic expertise.

We know the needs and the threads of the financial system, as well as the challenges and opportunities of the real economy, so it is our duty to assist in the process of unlocking solutions,” she said.

She pointed out that climate change effects can be direct and local, caused by extreme weather events; macroeconomic and wide-reaching, through permanent and structural changes; and these economic effects also trickle through the financial system, via credit defaults and asset devaluations.

Mauderer stressed the importance of leveraging private financing to fill this gap.

“Investment flows from the global north to the global south could then bring business opportunities that are mutually beneficial,” she noted, referring to green hydrogen for example.

The meeting convened central bank governors, deputy governors and advisers from 15 SADC member states.

Apart from deliberating on financial and macroeconomic stability, the assembly also began shaping the strategy for 2024-2026.