NGFS and the Impacts

EcoVision
Nov 22
3 min read

What is NGFS in terms of ESG/ sustainability?

NGFS stands for the Network for Greening the Financial System.

It’s an international coalition of central banks and financial supervisors working together to manage climate-related financial risks and mobilize finance to support the transition toward a sustainable economy.

Overview

Full name: Network for Greening the Financial System (NGFS)
Established: 12, December 2017
Founded by: Eight central banks and supervisors, including from France, the UK, Germany, Mexico, Singapore, and China. (not including USA at that moment..)
Secretariat: Hosted by the Banque de France (Bank of France). Announcement Venue: One Planet Summit in Paris, hosted by French President Emmanuel Macron.
Founding Members:
- Banque de France
- Bank of England
- Deutsche Bundesbank (Germany)
- De Nederlandsche Bank (Netherlands)
- Banco de México
- Monetary Authority of Singapore
- People's Bank of China
- Sveriges Riksbank (Sweden)

As of today, the NGFS includes over 120 members and observers, representing nearly all major economies.

Before 2017, climate change was widely recognized as an environmental and scientific challenge, but not yet fully integrated into financial system thinking. Most financial regulators, central banks, and monetary authorities viewed climate change as a social or policy issue, outside their mandates.

Purpose and Mission

The NGFS aims to:

Integrate climate and environmental risks into financial supervision and monetary policy.
Encourage green finance — i.e., directing capital flows toward sustainable investments.
Develop analytical tools, data, and guidance to help central banks, regulators, and the financial sector assess climate-related risks.

Why It Matters

Climate change poses major risks to the stability of the global financial system, such as:

Physical risks: losses from climate-related events (floods, storms, droughts).
Transition risks: financial impacts from policy, technology, or market shifts toward a low-carbon economy.

The NGFS helps financial authorities identify, measure, and manage these risks, ensuring financial institutions are resilient to climate shocks.

Key Areas of Work

Focus Area	Description
Supervision & Risk Management	Embedding climate risks into banking regulation and stress testing.
Monetary Policy	Exploring how central banks can consider *climate factors* in their portfolios and operations.
Data & Scenario Analysis	Developing standardized climate scenarios and data for financial modeling.
Sustainable Finance	Promoting green bond markets, climate disclosure, and alignment with the Paris Agreement.

NGFS Climate Scenarios

One of NGFS’s most widely used contributions is the development of climate transition and physical risk scenarios.

These scenarios help governments, banks, and investors model how climate change and policy actions may impact economies and sectors.

Scenario Types (Examples):

Scenario Type	Description
Net Zero 2050	Rapid decarbonization; strong early policy action; low physical risk.
Orderly Transition	Gradual but well-managed transition to low-carbon economy.
Disorderly Transition	Delayed actions followed by sudden, severe policy changes.
Hot House World	No significant climate action; severe physical impacts and economic losses.

These are used in climate stress testing, portfolio risk assessments, and ESG financial disclosures (aligned with TCFD frameworks).

NGFS and Other Frameworks

Framework	Relationship to NGFS
TCFD (Task Force on Climate-related Financial Disclosures)	NGFS scenarios support TCFD-aligned reporting by financial institutions.
ISSB / IFRS S2	NGFS data helps underpin climate risk disclosure standards.
SBTN, SBTi, Paris Agreement	NGFS aligns with global climate targets and transition modeling.

Summary: Why NGFS Matters

Aspect	NGFS Contribution
Financial Stability	Helps central banks understand and mitigate climate-related risks.
Data & Scenarios	Provides common modeling frameworks for stress testing and disclosure.
Global Alignment	Creates consistency in how institutions assess climate risks worldwide.
Policy Influence	Encourages integration of sustainability in monetary and fiscal planning.

Achievements & Influence Since 2017

Today, NGFS members represent over 90% of global GDP and the majority of global financial assets.
NGFS has helped transform climate risk from an “ESG issue” to a core financial stability concern.
Its climate scenario datasets are used by:
- National banks (e.g., Bank of Japan, ECB)
- International institutions (IMF, World Bank)
- Private-sector ESG analysts
It shapes policies on green bonds, climate stress testing, and climate disclosure requirements worldwide.

The Network for Greening the Financial System (NGFS) is a global network of central banks and financial regulators collaborating to make the financial system more climate-resilient and environmentally sustainable. It drives the integration of climate change into economic modeling, risk assessment, and investment decision-making — supporting the world’s transition to a net-zero economy.