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The oversight of payment systems and the green agenda: Part 2

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The oversight of payment and settlement systems is a central bank function whereby the objectives of safety and efficiency are promoted by monitoring existing and planned payment, clearing, settlement, and related arrangements, assessing them against these objectives and, where necessary, inducing change. These arrangements include financial market infrastructures and other payment, clearing, settlement, and reporting arrangements and activities, both within and across jurisdictions (encompassing systems and activities involving large-value and retail payments, foreign exchange settlement, securities and derivatives clearing and settlement, multilateral netting, and collateral management) as well as retail payment instruments, schemes and arrangements, and services.1

Central banks today should broaden the scope of their oversight function to incorporate the ecological sustainability of the payment systems they oversee. This means that they should strengthen the resilience of payment systems to ecological challenges, including by mitigating and managing physical and transition risks (NGFS 2020). It also means that they should make choices and induce behaviors that reduce the ecological impact of payment systems. The private sector may already prove open to pursuing an ecologically progressive approach, as the experience of PayPal and DTCC suggests.2, 3

In addition, in the context of their technology-neutral oversight and regulatory approach to payment systems — whereby central banks allow the market to choose technologies for applications to payment systems and services — under an ecology-consistent approach, central banks should approve only technologies that are ecologically sustainable, based on sound analysis. A recent study by the Bank of Italy, for instance, estimates the carbon dioxide equivalent emissions of the TARGET Instant Payment Settlement (TIPS) system and compares it to that of Bitcoin and other payment infrastructures, showing that the TIPS carbon footprint in 2019 was considerably smaller than that of the comparators (Tiberi 2021).

More broadly, central banks should internalize within their payment system oversight function a forward-looking and integrated approach to sustainable resource management, for instance, by adopting "circular economy" principles.  Here are some preliminary and tentative considerations on how central banks could contribute to ecological sustainability through the oversight (and catalytic) function of their payment systems:

  • Pursuing sustainable use of resources and optimal waste management

    • Improve the energy and material efficiency of payment systems.
    • Promote the payment system’s use of energy from renewable sources.
    • Reduce paper consumption and use water resources more sustainably.
    • Promote access to clean technologies for the provision of digital payment services.
    • Reduce production of waste at source.
    • Recover waste produced and, specifically, waste from shredded banknotes.
  • Making financial market infrastructures eco-resilient

    • Ensure that the governance frameworks of payment systems include eco-risks within financial market infrastructure (FMI) risk management frameworks (eco-resilience should include the risks that FMIs pose to eco-sustainability and those that they face from eco-unsustainability, that is, physical and transition risks).
    • Promote the use of “green” assets as collateral in repo transactions in payment systems where this is required to manage credit and liquidity risks; this would support investment in eco-sustainability.4
  • Adopting green procurement

    • Adopt procurement policies that create incentives for suppliers to have the best environmental practices.
    • Adopt procurement of eco-sustainable technologies (work equipment and consumer goods with low environmental impact over their entire life cycle if they meet all the functional requirements).
  • Promoting a conducive culture

    • Promote analysis and research on payment systems and ecological sustainability.
    • Undertake cooperation on eco-sustainability initiatives within and outside the central bank.
    • Undertake educational and awareness initiatives on eco-sustainability for payment system stakeholders and the general public.
    • Encourage the industry to design payment systems and services that can support the wider adoption of clean technologies by households and small businesses — for example, the “pay-as-you-go” model for solar lighting (IRENA 2020).

Finally, in their capacity as overseers of the national payment systems (NPS), central banks should consider the following:

  • Internalize payment system eco-sustainability within their Oversight Policy Framework.
  • Internalize eco-sustainability within payment system modernization strategies.
  • Design appropriate standards and policies to support payment system eco-sustainability.
  • Identify appropriate tools and metrics for monitoring progress in payment system eco-sustainability.
  • Report periodically on progress in payment system eco-sustainability.

Far from being exhaustive and fully thought out, the above list should be subject to deeper and broader reflection by the international central banking and financial communities. This reflection should reach beyond the NPS and extend to all infrastructures supporting financial activities (for example, credit bureaus, trading platforms, messaging systems, routing networks, and others).


During the past years, as Governor of the Bank of England Andrew Bailey remarked at the COP26, “we have learnt a lot, achieved a lot, but as with everything on climate change, there is an awful lot more to do.”5

Indeed, it is high time for the financial sustainability agenda to incorporate mitigation of the ecological impact of payment systems and other FMIs as one of its priority objectives.  For its part, and in line with its responsibility as the international standard-setting body for FMIs worldwide, the Committee on Payments and Market Infrastructures at the Bank for International Settlements should consider onboarding the agenda within its own remit.6  


CPSS (Committee on Payments and Settlement Systems). 2005. “Central Bank Oversight of Payment and Settlement Systems.” Bank for International Settlements, Basel, Switzerland.

IRENA (International Renewable Energy Agency). 2020. Innovation Landscape Brief: Pay-as-You-Go Models.  Abu Dhabi: IRENA.

NGFS (Network for Greening the Financial System). 2020. “Guide for Supervisors—Integrating Climate-Related and Environmental Risks into Prudential Supervision. , Technical document, NGFS, Paris.   

Tiberi, P. 2021. “The Carbon Footprint of the Target Instant Payment Settlement (TIPS) System: A Comparative Analysis with Bitcoin and other infrastructures.” Research Papers No. 5, Banca d’Italia, Rome.

The author assumes sole responsibility for the opinions expressed in this blog post. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent.
The author thanks Harish Natarajan for his comments on previous versions of this blog post and for supporting the author’s ideas on this topic.

1 This definition draws on the Glossary of the Bank for International Settlements and elaborates on the definition of “oversight” originally formulated by the Committee on Payments and Settlement Systems (the predecessor of the Committee on Payment and Market Infrastructures) (CPSS 2005).
2 See Digital Financial Solutions for Climate Resilience, by Sri Shivananda, EVP, Chief Technology Officer, PayPal’s Executive Sponsor of Environmental Sustainability, PayPal Newsroom, September 20, 2021.
4 See UN launches African repo market in bid to lower borrowing costs, by T. Stubbington, Financial Times,  November 3, 2021.
5 See Laying the Foundations for a Net Zero Financial System, speech by Andrew Bailey, Governor of the Bank of England, remarks at COP26, November 3, 2021.
6 See Principles for Financial Market Infrastructures, report by the Committee on Payment and Settlement Systems and the Technical Committee of the International Organization of Securities Commissions, Bank for International Settlements, April 2012.


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