The South African Reserve Bank published an address by Deputy Governor Fundi Tshazibana arguing that African central banks should engage with climate change through limited, mandate-consistent roles focused on financial resilience, rather than by using monetary policy to directly finance the transition. The speech rejected adding climate objectives to interest-rate setting or funding climate projects from central bank balance sheets, positioning price stability and central bank credibility as prerequisites for sustainable finance. Tshazibana framed climate risk as relevant to central banks because physical and transition risks can drive price and financial instability, while noting Africa’s vulnerability and financing constraints, including adaptation needs estimated at at least USD 70 billion annually with tracked finance covering less than a quarter, insurance penetration of around 3%, and a projected weighted cost of capital for energy infrastructure of 15.6% versus roughly 5% in Western Europe and the United States. Instead of “Green QE” or climate-adjusted inflation targeting, the proposed contribution focused on three areas: developing deeper capital markets via macroeconomic and fiscal stability and effective regulation, including clear and standardised climate risk disclosures for financial and non-financial firms and supervisory embedding of NGFS adaptation pillars; supporting credible carbon markets and improved carbon credit data, with Africa currently accounting for 16% of the global carbon market; and closing insurance protection gaps alongside broader financial inclusion. For prudential resilience, the speech called for climate disclosure requirements, climate stress testing and governance integration tailored to African banking structures and vulnerabilities, with voluntary disclosures preceding mandatory requirements. In the context of South Africa’s Group of Twenty Presidency, the address noted ongoing work in the G20 Sustainable Finance Working Group on recommendations to scale up sustainable finance, strengthen financing for climate adaptation, and improve carbon credit market functioning and data, alongside a focus on widening insurance gaps.
South African Reserve Bank 2025-10-15
South African Reserve Bank deputy governor rules out Green QE and urges climate action via disclosures, stress tests and market development
The South African Reserve Bank's Deputy Governor Fundi Tshazibana stressed that African central banks should tackle climate change within their mandates, focusing on financial resilience over direct monetary policy. Tshazibana highlighted Africa's climate vulnerability and financing constraints, advocating for deeper capital markets, credible carbon markets, and closing insurance protection gaps. The address also noted ongoing G20 efforts to enhance sustainable finance and climate adaptation financing.