The interview was conducted by Deepshikha Sikarwar & Vinay Pandey.

How do you see US president Donald Trump’s election weighing in on the entire climate debate?

We are central bankers and supervisors, so we are non-political. We are data-dependent and science-based. We are here together to discuss the impact of climate and nature-related risks on our economies. Talking about climate change in general, there are two major risks: physical risks; meaning increasing numbers of droughts, floods, hurricanes and wildfires. And transition risks, which are the costs and consequences of the transition to net zero.

If climate policy falls short then, of course, economic and financial risks will increase. That's what central banks must look at. We analyze the data and see what kind of impact climate change has on the economy. That's our job. We must deal with these risks, and we will address them, also towards governments.

What does the withdrawal of the US Federal Reserve mean for NGFS and its agenda? 

The NGFS was founded at the end of 2017. At that time, we were only eight members. Now we are 144. The Fed, as you just mentioned, left in January. Except for the US, none of the members have exited so far. Instead, thirteen new members have joined since I took over as NGFS Chair at the start of 2024. So, we are still a growing organization.

And our agenda stays the same, because it has nothing to do with the exit of one member. If we see deregulation, if we see climate being taken off the policy agenda, then we might see increasing physical risk, meaning an acceleration of climate change. And that might mean that we even become more vocal on the risks we see.

How do you see India’s progress? What more needs to be done?

It's not up to me to judge the stance and actions of our colleagues from the Reserve Bank of India. I just mentioned our latest update on the long-term scenarios about GDP being 15 % lower, worldwide, than in a world without climate change. For India, the GDP loss is even bigger. If the world keeps its current policies unchanged, global temperatures are expected to rise by three degrees Celsius (on average). And this could cost India roughly 19 % of GDP by 2050, compared to a world without climate change. So, for India, we show that climate change can have even more serious consequences than elsewhere. And, at the same time, the scenarios show that India is among those countries who would benefit the most from a global transition towards net zero emissions.

You've said your actions are data dependent. What is the data telling us in terms of the economic impact of climate change? Because there is also a pushback.

We are analytical powerhouses. Our climate scenarios are our flagship product. We have set up different long-term scenarios. For example, a current policy scenario or a fragmented world one, where climate policy is delayed, divergent and/or insufficient across the globe. Or a scenario where policy would bring us to a Paris-aligned world. We look at what those different climate scenarios mean in economic terms, for GDP, inflation, productivity, and so on.

The fifth vintage of our long-term climate scenarios was published at the start of November last year. It told us that under the current policies scenario, global GDP will be 15 % lower globally in 2050 than it would be without climate change. This is a striking number, and in fact we have reason to believe that it doesn’t even show the full picture, because we do not yet have a full set of data. It does not reflect, for example, future sea level rises, or the kind of climate migration that we might see. When we have more data, we will get more insights, and the results might even change.

What has the conversation been like at the plenary in the backdrop of the US exit and what is the assessment of the progress made so far?

We've never seen such a strong commitment as we see here in India today. More than 100 people from over 60 countries came from all around the world to be here in person. Another 100 people participated virtually. We've never had so many senior level representatives from central banks and financial supervisors. We have more than 25 governors or deputy governors here in India at our annual meeting. 

What we’ve reflected on today is how political headwinds, deregulation, impact our work. And our work stays the same, because we are non-political animals, and we stick to our mandates. With so many central banks from all over the world in our network, we all have different mandates. In emerging markets or developing countries, the mandates are often not as narrow as they are in, for example, Europe. So, we do have members with broader mandates. That allows them to do different things, such as promoting green finance or other financial sector development.

Most central banks have initiated some sort of action on tackling climate change and its economic impact. What is your assessment of the progress and what more is needed?

With 144 members from all over the globe, there are members at completely different stages, depending on when they started and how big their capacities are. Some members are very advanced, like the French, the Dutch, the UK, and there are those who have just started or are so small that they barely have capacity.

What are the advanced central banks doing? They have started with climate stress testing in the banking sector. For example, in Europe, we have already done a few climate stress tests. In India, Brazil and many countries in Africa, you see that climate change strongly affects food prices. We also see, in some African countries for example, that energy prices are significantly affected by climate change. We cannot rely on past data or experiences; we need a forward-looking perspective. There's a lot of uncertainty and non-linearity. So, we must work in terms of scenarios.

When the NGFS was set up in December 2017, there were some central banks who thought, “oh my god, there's climate change and we do not know at all whether this will affect our work, our mandates”. We thought, “this might be such a big threat that it's better to collaborate, put together all the resources we have and to see what will come out”. This is why the NGFS was set up. Over the years, we have not only realized that climate change really matters to the economy but also confirmed that it affects our mandates.

The whole idea of this network is that we share our knowledge amongst our members. This is the benefit of being a member of the NGFS. And we also produce public goods like the scenarios mentioned, which can be used by financial sector players and policymakers beyond the network.

Different governments have different commitments to climate change and central banks have different mandates. Given that, how effective can this body be?

Climate policy is not part of our mandate. What governments do is another thing. Of course, our analysis shows that if governments take less action on climate, it will have a huge impact on the economy, often also on inflation.

You are right, central banks globally have a wide range of different tasks and mandates. But this is also the beauty of our network. 144 different organisations learn from each other. Many members – for example emerging markets – have a lot in common with each other. These countries often form groups among peers so that they can share experience and best practice.

Any thinking on short-term scenario mapping?

We will soon publish our short-term scenarios with a time horizon of three to five years, hopefully in the first half of the year. We think it is important to show what will happen within this time horizon.

Not many care about 2050 and 2100. Not many of us work over this time horizon. If you are a CEO, your contract lasts 3‑5 years. If you're a politician, you want to be re-elected within 3‑5 years. A scenario which tells you what might happen in 2050, of course, really matters for human beings. But, to tell the story to someone who thinks short term, you need also short-term scenarios.

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