Haruhiko Kuroda, Governor of the Bank of Japan (BoJ), warned that climate change is among the biggest challenges facing the global economy.
“Climate change, how to realise a green economy … these issues are really huge and I must say the most challenging issues faced by the global economy,” Kuroda told a virtual meeting of the U.S. National Association for Business Economics. “Making the economy greener is a goal shared by both advanced and developing economies.”
Kuroda also warned that “some regions in Asia are particularly vulnerable to the economic and social consequences of natural disasters and rising sea levels resulting from climate change.” He referenced a McKinsey research report that found Asian countries with lower GDP per capita are most at risk from climate impacts.
Kuroda has previously expressed strong support for the use of market mechanisms to pursue sustainable growth, including “appropriate institutional arrangements and guidance by the authorities”. However the BoJ, which joined the Network for Greening the Financial System late last year, seems focused primarily on identifying climate risk.
The Japanese Financial Services Agency is preparing for a climate scenario analysis and stress test pilot covering the country’s five biggest banks. In addition, the BoJ will hold an international research workshop on climate-related financial risks in December.
However, analysts do not expect the BoJ to target green bonds in asset purchases, partly because of concerns about the size of its Quantitative Easing programme.
Independent analysis has found that Japanese companies remain substantially out of alignment with Paris Agreement goals and that current investor portfolios are significantly exposed to climate-related risk.
This page was last updated April 23, 2021
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