Roles of ASEAN Central Banks in Managing Climate Risks

This collaborative report from the central banks and monetary authorities of the Association of Southeast Asian Nations (ASEAN) assesses the implications of climate and environment-related risks for both financial and monetary stability within the region. It examines the roles and limits of central banks in responding to these risks, offering a series of recommendations to help ASEAN banks develop their ability to maintain financial and economic stability in the face of the climate and environmental crisis.

The report is substantive, and covers the ASEAN experience with climate change and the materialisation of climate risks, while also establishing the case for (and limits of) central bank involvement in mitigating and managing these risks. It provides a comprehensive scan of global, regional and national efforts by central banks and financial supervisors, and details the challenges faced in greening ASEAN financial systems.

The report explains that the economic impact of climate change to ASEAN nations can be profound, and central banks have a clear role in maintaining financial stability. Although no ASEAN central bank has a specific climate or environmental mandate, managing climate risk is already within the mandates of central banks and supervisors as part of their duty to ensure the resilience of the financial system.

Recognising that ASEAN central banks are in the early stages of understanding climate risk and how they might contribute to emissions reductions, the report outlines 17 recommendations organised into seven themes. These include building capacity and awareness, integrating ESG and sustainability principles into central bank operations and strategies, and studying the feasibility of developing a “principles-based ASEAN-wide taxonomy for green and transitional activities”. The report also recommends that ASEAN central banks develop a common data collection framework and “consider providing incentives to financial institutions”.

Published by the Bank Negara Malaysia, the report is the first from a task force established by agreement among central bank and monetary authority governors from the ASEAN nations. While these governors endorsed the report prior to its publication, the recommendations it contains are voluntary and non-binding.