Deputy Governor Christian Hawkesby says the recent upper North Island floods and Cyclone Gabrielle have highlighted how climate change is already impacting the people of Aotearoa. Climate-related risks continue to evolve, with the potential to significantly affect the financial system in the future.
“The financial stability risks associated with climate change are significant, necessitating an urgent and collaborative response. The Reserve Bank of New Zealand is obliged to identify, manage, and mitigate these risks as part of our daily activities,” Mr Hawkesby says.
The draft guidance has been adapted from international best practice to suit the New Zealand context and applies to all of our regulated entities including registered banks, licensed insurers, licensed Non-Bank Deposit Takers, and operators of designated Financial Market Infrastructures.
Our draft guidance suggests that entities manage climate-related risks within their broader risk management framework, albeit certain features of climate-related risks make it important to give them specific analytical consideration.
“We recognise that climate-related risks will not affect all entities equally and the guidance stresses that appropriate measures are proportionate,” Mr Hawkesby says.
We are proposing entities develop their capabilities in climate-related scenario analysis and stress testing. It is important for entities to look ahead to a range of plausible future climate scenarios, for example more frequent floods and droughts, in developing actions and targets to ensure that their business model and strategy is resilient.
We welcome submissions on the guidance questions set out in our Managing climate-related risks consultation paper by 7 June 2023.
Read the consultation paper and submit your feedback
Managing climate-related risks consultation paper (PDF 1MB)
Managing climate-related risks guidance (PDF 998KB)
Read the RBNZ Climate Changed 2021 and Beyond report
Prudential Practice Guide CPG 229, Climate Change Financial Risks, published by the Australian Prudential Regulation Authority (PDF 1.38MB)
Principles for the effective management of climate-related risks, published by the Basel Committee on Banking Supervision (PDF 227KB)