RBNZ published a response to the first draft advice of the Climate Change Commission to the government of New Zealand. RBNZ welcomes the draft advice and emphasizes on understanding and addressing the exposure of the financial sector, including banks and insurers, to climate-related risks. As part of its climate change strategy, RBNZ will analyze the potential implications of climate change for financial stability, engage with entities to explore their internal climate risk strategies, and seek to identify opportunities to enhance disclosure of climate risks in New Zealand.
RBNZ notes that its role is to guard the prudential soundness of the entities and the system it regulates and it has joined 83 other central banks and supervisors to strengthen the global response to climate change through the Network for Greening the Financial System (NGFS). This submission from RBNZ is limited to the following five areas of relevance to the RBNZ remit:
- Climate change and financial stability—the nature of risks and pace of change required
- The role of finance—recommending greater emphasis on finance, or investment, to more fully acknowledge the role of finance as an enabler and a potential blocker of climate resilience (barriers, interlinkages, levers)
- Disclosure as a mechanism to improve the systemic management of climate risks—risk management and transparency
- Investing at scale (leveraging private investment, recognizing carbon bias and unwinding this, improving information) and the need for a "green" recovery
- Need for a considered and aligned approach
In response to the recommendation from the Climate Change Commission to implement the proposed mandatory financial disclosures regime and explore the creation of a similar regime that covers public entities at the national and local levels, RBNZ notes that further supporting evaluation evaluation is needed. RBNZ also indicates the need for an evaluation with respect to the recommendation to evaluate the potential benefits of mandatory disclosure by financial institutions of the emissions enabled by loans over a specified threshold. Furthermore, RBNZ supports the recommendation to investigate and develop plans to mobilize private-sector finance for low emissions and climate-resilient investments. It also supports the recommendation (which is a time-critical necessary action) to ensure that economic stimulus to support post-COVID-19 recovery helps to bring forward the transformational investment that needs to happen anyway to reach the joint climate and economic goals. Finally, RBNZ supports the Commission’s advice that a carbon price alone is insufficient and that central and local government work in partnership and consider adaptation with mitigation.
- News Release
- RBNZ Response to Draft Advice (PDF)
- Climate Change Strategy of RBNZ
- Advice from Climate Commission (PDF)
- Climate Change Commission
Keywords: Asia Pacific, New Zealand, Banking, Climate Change Risk, Sustainable Finance, ESG, Disclosures, Financial Stability, COVID-19, Climate Change Commission, Response to Consultation, RBNZ
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Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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