German Central Bank head says “far-reaching economic intervention” necessary to protect climate

The head of Germany’s central bank, Andreas Dombret, has warned that “far-reaching interventions” in the economic system are necessary if the global community wants to come close to reaching the Paris Climate Agreement’s goal of limiting global warming to two degrees, Yasmin Osman writes in Handelsblatt. Dombret argues that the financial sector plays a key role in the transformation towards a more sustainable economy, adding that costs caused by natural disasters could otherwise mount so much that insurance companies are no longer able to shield the economy from profound damages. Dombret cautions that a change of the economic system “will force market participants to revaluate many of their assets”, - meaning that the transformation will produce significant losses, for example among fossil fuel companies. The German federal reserve’s head therefore calls for a better risk evaluation of loan approvals to safeguard banks from stranded investments, Osman writes.

Read the article in German here.

See the CLEW factsheet Climate finance: a brief overview of Germany’s contributions for more information.