Central Bank commits to socially responsible investing

New charter ‘embeds climate change’ considerations into regulator’s operations

The Central Bank of Ireland has said it will apply sustainable and socially responsible investment principles to its own investments, committing to a new sustainability charter that will exclude companies from certain “controversial” sectors.

Under the terms of its new sustainable investment charter, the financial regulator will incorporate environmental, social and governance (ESG) considerations into its processes for screening potential investment assets.

The charter will apply to the Central Bank’s investment portfolio, which mostly comprises Government bonds and other fixed-income securities as well as futures and “other money market instruments”, according to the regulator’s website. The portfolio was valued at €17.4 billion at the end of 2021, the Central Bank said in its latest annual report.

The regulator said it would use “negative screening” to weed out and “systematically exclude” controversial companies and sectors from its portfolio.

Businesses involved in the manufacturing of prohibited weapons as defined by international treaties, tobacco companies and corporate activities such as coal mining will fall under the definition of “controversial”, the Central Bank said. As such, it said it will “not knowingly invest” in companies involved in any of these industries or activities.

From 2023, it said it will begin publicly disclosing the climate change-related metrics of its investment portfolio, which it said is managed externally.

But “regardless of the nature of external equity management arrangements in place” the Central Bank said it retained “ultimate responsibility” for the principles it applies to its investment assets.

In a statement, deputy governor Sharon Donnery described the charter as a “landmark publication” that reflects the regulator’s “ongoing efforts to incorporate climate change and sustainability considerations into our operations”.

She said: “It will provide an overarching guide as we seek to embed these considerations across our mandate. We are committed to reporting openly and transparently on this work and, to this end, will publish climate change-related metrics of our investment assets from 2023 onwards.”

Separately, figures released by the Central Bank on Thursday reveal that the value of Irish credit and debit card spending, including ATM transactions, rose to a new record high of €8.5 billion in May. Total card spending jumped 12 per cent between April and May, according to the data, “predominantly driven” by a large increase in ‘point of sale’ spending, which jumped 26 per cent from May 2021 to €7.3 billion last month.

Total card expenditure outside of Ireland increased 12 per cent, or €44 million, in May compared with April as the summer holiday season started to ramp up, a 170 per cent increase on last year when opportunities for travel were still constrained by Covid restrictions.

Irish household deposits, meanwhile, dwindled by €212 million last month following a sharp €1.2 billion increase in April, the Central Banks said.

Overall, deposits have increased by almost €7.4 billion in the year to the end of May. The annual growth rate has declined from the highs seen during the first two years of the pandemic when household spending was largely held back by public-health restrictions, however.

Ian Curran

Ian Curran is a Business reporter with The Irish Times