To give you a brief background on the central bank legislation, since its inception in 1964 the Bank has operated under 3 different Bank of Zambia Acts; the BoZ Act of 1965, the BoZ Act of 1985 and the current BoZ Act of 1996. Each of these Acts has responded to the era of its time. For example, the Acts of 1965 and 1985 were characterised by high Government involvement in the operations of the Bank. The Bank administered exchange control regulations. It also determined and regulated the frequency and rates of fees, commissions and interest rates etc charged by financial institutions. The economic reforms that swept the country in the 1990’s saw the ushering in of the current BoZ Act of 1996 which supported the Government’s free market policies. The Bank’s mandate was made clearer, exchange control regulations were suspended and the Bank’s regulation of interest rates etc was removed. There was also improved transparency and accountability. Since the enactment of the BoZ Act of 1996 two issues have precipitated the need to have the Act reviewed again; 1. In 2002, the IMF and the World Bank conducted a joint assessment of Zambia’s financial sector under the Financial Sector Assessment Programme (FSAP). The result of this assessment raised awareness of various weaknesses in our financial system which needed to be addressed. For this purposes, the Government approved the establishment of the Financial Sector Development Plan (FSDP) in 2004 to address these weaknesses and implement recommendations.
But there are also potential indirect benefits for their national economies: establishing a ‘green risk free curve’ for private issuers to use as a benchmark for green pricing; setting conventions for issuance, including definitions of acceptably green projects or climate goals; providing assets for hedging and collateralising borrowing; and encouraging the development of climate finance expertise in the local financial services community, driving wider product innovation. The issuance of corporate green bonds in the Netherlands, for example, picked up materially after the Dutch government issued a SGB in 2018 (Chart 13). Building block 3: asset allocation strategies However rapid the progress in climate-related disclosures and financing vehicles on the issuer side of the equation, it has been totally eclipsed by the explosion in interest on the investor side. Gripped by an increasing awareness of the scale of the climate challenge, and the impact of past and expected future policy change, investors are demanding, ever more loudly, that those in charge of their savings demonstrate that they can measure, and direct, their investments in ways that are sensitive to the climate impact of those flows. Asset managers have launched an ever-increasing range of ‘climate aware’ funds in recent years (Chart 14), and invested heavily in internal expertise, building systems, and hiring in specialists (or buying their firms outright).36 The consequent shift in assets under management towards funds with higher sustainability ratings, and away from those with lower ratings, is striking (Chart 15).