Bank for International Settlements publishes primer on climate-aware investing for central bank investors

The Bank for International Settlements has published a BIS Paper by Anandakumar Jegarasasingam that introduces “climate-aware investing” as a practical framework for central bank investors, covering both climate risk management and, where mandates allow, pursuing climate impact through investment decisions. The paper explains core concepts and measurement issues relevant to investment portfolios, including greenhouse gas emissions across scopes 1, 2 and 3 and “financed emissions”, and summarises key disclosure initiatives such as the Task Force on Climate-Related Financial Disclosures and the International Sustainability Standards Board. It then surveys common climate-aware strategies and tools used in markets, including exclusionary screening and divestment, thematic investing and labelled bonds, best-in-class selection, index-based decarbonisation approaches, and portfolio alignment techniques such as temperature alignment and implied temperature rise. A central focus is the constraints and trade-offs specific to central banks, including balance sheet objectives centred on liquidity, safety and return, differences across policy portfolios, own funds, pension portfolios and third-party mandates, and operational and reputational challenges when integrating climate considerations into reserve and other investment activities.