© Pedro Szekely
Te Pūtea Matua, the Reserve Bank of New Zealand (RBNZ), has released its inaugural disclosure setting out its efforts to monitor and manage climate-related risks, as well as its progress in slashing its own operational emissions and tracking those linked to its investments.
The report, which covers the 2023/2024 year up until the end of June, focuses on meeting the baseline recommendations of the Network for Greening the Financial System’s (NGFS) guidance on climate-related disclosure for central banks. However, the RBNZ indicated it wants to produce more ambitious disclosures in the future.
“We are kaitiaki (guardians) of New Zealand’s financial ecosystem,” RBNZ assistant governor Simone Robbers said in a statement. “Anything that challenges the stability of the financial system and our economy, such as climate-related risks, is our core business.”
The report indicates a slight drop last year in the production intensity of the RBNZ’s sovereign bond portfolio, from 286.7 equivalent tons of CO2 per million US dollars invested to 273.5 in 2024. Less positively, the central bank’s operational emissions were 15% higher than in 2022/23, with a growing workforce leading to more purchased goods and services, business travel and staff commuting. The RBNZ is eyeing a 42% reduction in operational emissions by 2029/2030 compared to this year.
The report also details the climate scenario stress test the RBNZ ran in 2023 with New Zealand’s five largest banks, which included a “too little, too late” scenario combining high physical risks from climate change with high transition risks. The aggregate results modelled by banks for this scenario suggested dividends would be 40% lower and profits 25% less than a base scenario without climate related risks.
Based on the stress test, the RBNZ carried out a pilot exercise in May that involved adapting the “too little, too late” scenario to test the resilience of the central bank’s own climate strategy. “This approach is useful because it challenges us to re-imagine the circumstances we might plausibly face as an organisation under different assumptions about how the future could unfold,” the RBNZ said in the report. “A broader scenario analysis exercise in future could focus on what we may need to do differently, when, and under what conditions, in turn informing how our climate strategy may need to evolve to continue serving its purpose.”
Elsewhere, the report outlines the broader measures the RBNZ has taken to manage climate risks in line with its mandate, including the regular provision of climate chart packs to its monetary policy advisory group – updating them on New Zealand’s exposure to physical and transition risks – and the publication of new guidance in March for regulated entities on managing climate-related risks.
The RBNZ added that it is “exploring options to improve our capacity to model the economic effects of transition risk, allowing us to better understand which signals of change are relevant to price stability and which are not”.
The RBNZ co-chairs the NGFS’s ‘Net Zero for Central Banks’ workstream alongside the Banca d’Italia, which includes the subgroup working on central banks’ own disclosures of climate-related and environmental risks.
This page was last updated October 24, 2024
Written by
Katy Lee has been a writer for Green Central Banking since early 2024, focused on our Asia coverage. A Paris-based journalist who has written for major international titles for more than a decade, she is the co-host of The Europeans, an award-winning podcast about Europe which often covers environmental issues.
