Anita Angelovska Bezhoska: International cooperation for a green
and sustainable economy
Remarks by Ms Anita Angelovska Bezhoska, Governor of the National Bank of the
Republic of North Macedonia, at the Green for Growth Fund dinner , Skopje, 14
September 2023.
* * *
Introduction
Distinguished guests, ladies and gentlemen, good evening.
First, let me express my deep appreciation to the management of the Green for Growth
Fund for inviting me to join this gathering enriched with the presence of different
stakeholders - public and private, European and domestic, which nicely symbolizes
inclusive and joint national and international efforts needed to tackle one of the most
critical global priorities - climate change.
According to the latest World Economic Forum Survey1, climate change is one of
the top two global risks, both in the medium and long run, alongside geopolitical
fragmentation. It does not come as a surprise, given the estimates that climate change
reduces global economic growth by 0.4 p.p., with a more pronounced effect in emerging
economies (0.7 p.p.), and perhaps even more importantly, losses are estimated to
further increase. This, in particular, is increasingly important for less developed
economies that tend to be highly vulnerable to climate risks, but are short of adequate
fiscal and more broadly financial resources to mitigate these risks.
Climate change affects all regions around the world. Polar ice shields are melting
and the sea is rising. In some regions, extreme weather events and rainfall are
becoming more common while others are experiencing more extreme heat waves and
droughts. This summer, we have witnessed record-breaking droughts, heatwaves, and
floods that caused suffering and huge losses across every continent. Data show that
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July 2023 was the hottest month on record globally .
Given the severe toll that climate change is already taking, it would not be an
overstatement to say that the time for action is long past due. Along those lines, at
the recent G-20 Summit in India, global leaders committed to urgently accelerate the
actions recognizing that physical and transitional policy risks have also a profound
short, medium, and long-term macroeconomic impact, including on inflation and
3
financial systems .
Central banks have recently significantly increased their attention to climate
risks, due to the large impact on their mandates in achieving price and financial
stability. Recent surveys point to a rising awareness and actions by the central banking
community. According to Invesco Survey, conducted in 2021, more than two-thirds of
the central banks consider climate action as part of their mandates, up from less than
4
half a year ago .
Focusing on the priorities
Recognizing the importance of climate risks, the National Bank has so far
undertaken multiple activities in the area, to increase awareness and stress the
importance of active contribution of all stakeholders to set a road to green and
sustainable economy. Our activities relate to inclusion of sustainable finance as a
separate objective in our Strategic plan, active participation in the international
network of central banks and regulators, publishing regular green finance data,
as well as adjusting monetary policy instruments to foster sustainable finance.
Very recently, (September 2023) we have adopted our first Medium-term Plan of
activities in the area of climate-related risks, as a way to set a comprehensive and
consistent framework for all activities that we plan to undertake. It aims to improve the
current regulatory framework, to set Guidelines for managing climate-related risks by
banks and further strengthen the supervisory approach, by incorporating the
climaterelated risks in the banks' overall risk assessment. The Plan also emphasizes the
importance of coordinated activities in the country and the need for cooperation with
other relevant stakeholders, given that climate issues require a coordinated national
approach. The Strategy also provide a first, preliminary overview of the exposure of the
Republic of North Macedonia's banking sector towards climate-related risks and shows
that more than half of total credit exposure of banks to corporates is to sectors that are
sensitive to climate policies. It can therefore be expected that climate-related policies
could have significant effects on these sectors and consequently on banks, though
further analysis is needed to assess the relevance and materiality of the transition risks.
The Plan was informed by the survey that we conducted to map the green finance
ecosystem and assess the banks' practices in managing climate risks. The Survey
showed that almost 90% of the respondents consider that climate change is an
important source of financial stability risk. Yet, as assessed by the majority of the
respondents, climate risk management is still in its early stage. The lack of standards
and tools, adequate regulatory framework, the lack of adequate data, as well as limited
internal resources and policies were pointed as the main barriers. To address some of
these challenges , we have already drafted guidelines for banks (which are currently
being discussed with the banking industry).
Transition towards a green and sustainable economy
The Republic of North Macedonia is sensitive to the risks associated with climate
change. This is related to the geographical and climatic profile of the country, which
exposes the country to the risks of natural disasters and extreme weather events (such
as droughts, torrential rains, floods, and heat waves), which, driven by climate change,
may further intensify in the next period. An additional factor is the prevailing economic
model, which includes high - energy intensity and reliance on climate-sensitive natural
resources. The domestic economy has a high consumption of energy, which, measured
per unit of product, is three times higher compared to the European average, although it
is slightly lower compared to the average of the Western Balkan countries. Electricity
production is predominantly by fossil fuels (about 74% of total gross production in 2022)
with the energy sector causing most of the country's greenhouse gas emissions. The
share of renewable sources in the gross final consumption of energy in 2021 is 17.3%,
while in the European Union, it is 21.8% on average. Such conditions point to the
exposure of the country to the risk of transition in the restructuring of the economy
towards the model of sustainable development.
Green transition is costly. According to some estimates, it will take from 3 to 5
trillion US dollars per year to finance the transition towards a sustainable
economy5. Therefore, the support of these endeavors by the banking systems is of key
importance. Our green finance statistics show rising financial support, but also a need
to strive further. Banks' green loans , more than doubled for the last four years, and
their share in the overall portfolio increased to 4.1% in June this year. Banks' green
lending is mainly channeled to the corporates that comprise 93% of total green loans
extended.
We need to acknowledge that these favorable developments are also a reflection of the
support - both financial and technical - provided by international and European
institutions and funds, which we deeply appreciate. One of the contributing institutions
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is certainly the Green for Growth Fund , which has been present in our country ever
since its inception, investing more than EUR 50 million so far, alongside 26 dedicated
technical assistance projects for local financial institutions.
Our impression is that things are changing rapidly and that we need to act, promptly.
Undoubtedly, the transition towards a green and sustainable economy has been and
will continue to be a challenging journey, especially for emerging economies that tend
to have higher investment needs, but lower domestic savings. In this vein, successful
arrival at the final destination of our journey will, to a great extent, depend on the
support of the abovementioned institutions.
On that note, I wish you a lively exchange of ideas and a pleasant evening.
Thank you.
1
World Economic Forum, The Global Risk Report, 2023
2
ERA5 data from the Copernicus Climate Change Service (C3S*)
3
G20 New Delhi Leaders' Declaration, New Delhi, India, 9-10 September 2023
4
Global Sovereign Asset Management Study, 2021.
5
McKinsey & Company, "The net-zero transition: What it would cost, what it could
bring," January 2022.
6
Set as an impact investment fund of public-private partnership, GGF is an early and
successful example of blended finance in action. The fund channels dedicated financing
to businesses and households through local financial institutions, and through direct
investments to eligible projects and companies. The GGF operates in 19 countries
across Southeast Europe, including Turkey, the European Eastern Neighborhood
Region, and the Middle East and North Africa.