Morocco’s central bank alerts to climate change impact on monetary policy

Central Bank governor Abdellatif Jouahri warned of the impact of climate change on monetary policy and said the bank was working with the government on a strategy on combating climate change and mitigating its impact.

 

Climate change “affects growth, employment and inflation, the main variables on which monetary policy decisions are based. Besides, climate-related risks are bound to have an impact on the banking and insurance industries, and on financial stability in general,” Jouahri warned at a conference in Rabat.

 

He highlighted Morocco’s commitment locally and globally to fighting climate change and promoting adaptation, adding that the central bank and the finance ministry along with other financial regulators were drawing up a strategy to combat climate change and increase funding.

 

The strategy “will be supported by the adoption of a green finance taxonomies, necessary to channel financial flows and prevent “green washing,” he said.

 

In this respect, he cited Morocco’s adherence to the United Nations Framework Convention on Climate Change 1995, the Kyoto Protocol in 2002 and the Paris Agreement in 2016. More recently, the kingdom has launched several major sectoral programs and strategies, including the “2020-2030 National Climate Plan “; the “National Low Carbon Strategy 2050”; the “2020-2050 National Water Plan, he said.

 

At the national level, Morocco aspires to increase the share of renewable energy to 52% of its energy mix by 2030 and in November 2021 has raised its nationally determined contribution to 45.5% of its greenhouse gas emissions by the same year.

 

The successful introduction of a carbon tax is conducive to the country’s climate efforts, he said.

 

Combating climate change and supporting mitigation and adaptation require massive funds, estimated by the World Bank at $78 billion up to 2050.

 

Impact

 

Climate change manifested in drought in particular could cause a 6.5% decline in GDP and a migration of 1.9 million people to cities, according to the world Bank.

 

He said the central bank was assisting the banking sector fend off climate risks including through working on new regulatory guidelines to provide banks with guidance on the data to be collected as well as the indicators and metrics to be put in place to measure climate-related risks emanating from major borrowers and to assess the green and sustainable portion of their portfolios. They also aim to transpose international sustainability transparency standards to enhance market discipline within the banking sector.

 

In terms of managing its foreign exchange reserves, Bank Al-Maghrib incorporates the principle of sustainability into its investment guidelines, by promoting sustainable and responsible investments.

 

He recalled that the bank had invested 100 million dollars in green bonds issued by the World Bank in 2016 and 200 million dollars in 2023 during the IMF-WB annual meetings in Marrakech.

 

The goal was for the bank to increase its investments in green and climate-friendly bonds to 10% in the long-run, he said.