Addressing the risks of climate change requires broad transformational change, Reserve Bank Governor Adrian Orr says.
In a speech delivered today at the Pacific Ocean Pacific Climate Conference, Mr Orr reflected on the need for transformational change, as well as a collective and urgent response to climate risks.
“There’s a lot to do and we are late in leaving port. Climate change is a risk that requires a collective response. Grounding a response in our collective knowledge, data and expertise will strengthen and compound the effects of our actions.”
Like many other central banks and regulators, the Reserve Bank sees climate change as a key risk to the financial stability underpinning the economy.
“As New Zealand’s central bank, we are the kaitiaki of the financial system tasked with maintaining and enhancing financial stability.
“Assessing material risks to banks and insurers, and the financial system as an ecosystem, is our core business. Climate sits firmly within those responsibilities,” Mr Orr said.
Risks from climate change to financial stability include the impact of droughts and rising sea levels on asset valuations such as farms and houses. There are also risks associated with the transition to a low carbon economy, such as changing investor appetite and consumer demand.
The Reserve Bank developed a climate change strategy in 2018 to integrate climate considerations across its work. Significant progress has been made by the Bank since then including:
- Reporting its own verified carbon footprint;
- Building capability to understand climate-related risks in the sectors we regulate;
- Training its supervisors in climate-related risks and integrating climate more intensively into our approach;
- Raising awareness of climate-related risks to financial stability through external engagements and our biannual Financial Stability Reports; and
- Leading through experience and collaboration with its involvement in the Network for Greening the Financial System (NGFS), Sustainable Insurance Forum (SIF), and leading the Council of Financial Regulators’ (CoFR) Climate work stream.
Mr Orr welcomed developments towards mandatory climate-related financial disclosures.
“Ultimately disclosure by our companies in New Zealand under a commonly-adopted framework will support a shift to smarter investment in a low-emissions economy.”
Mr Orr also highlighted the importance of connection in driving transformational change. He noted the challenges that the Pacific faces in confronting climate change and emphasised the resilience of Pacific nations, and that we all have a role to play.
“Wherever we live in the Pacific, we can lean on our cultural heritage of change, kaitiakitanga (guardianship) and connection to help us adapt.”