Te Pūtea Matua, the Reserve Bank of New Zealand (RBNZ) is still learning how climate change and monetary policy intersect, said bank Governor Adrian Orr during a Chapter Zero NZ event on 2 November.
RBNZ’s research has found that droughts have historically exacerbated recessions. With climate change increasing the severity and frequency of weather events, such as storms and floods, the central bank needs to better understand those risks, Orr said.
“Understanding the work to be done to transition to net zero will give us a sense of the potential impact on employment and inflation in New Zealand. Observing policy developments domestically and in other countries will help to develop our sense of how risks may affect the domestic economy,” he said.
RBNZ has taken some measures to address climate changes, including bank climate stress tests, providing guidance on how to manage risk, and working with scientists and researchers to identify data gaps. Meanwhile, Toitū Tahua Center for Sustainable Finance and the Ministry for the Environment are leading work on developing a green taxonomy.
While climate change is a challenge, it is also an opportunity to develop new technologies, Orr said.
“Central banks have a supporting role to play,” he said. That includes stress testing and prudential supervision, as well as providing guidance on climate risk analysis and facilitating collaboration between those developing transition finance mechanisms.
“Tackling climate change is both an enormous challenge and an opportunity that we all have an obligation to respond to. It remains within our power to take the steps required to transition our economic and financial systems,” he said.
This page was last updated November 10, 2023
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