Asia’s central banks must rise to the challenge of climate change
By Venkatachalam Anbumozhi, Senior Economist at Economic Research Institute for ASEAN and East Asia
Climate change is already a reality. The deadly bushfires in Australia, ferocious flooding in Indonesia and extended droughts in Vietnam have led to the destruction of infrastructure, investments and livelihoods. Yet across Asia, acceptance of this reality has not yet changed consumer behaviors across the region.
However, a new survey among 18 central banks from Asia shows that climate risks and low-carbon financing is a topic of increasing importance and relevance to the central banks and monetary authorities in the region, where many countries are experiencing hard impacts.
A third of the responding institutions have already issued policy statements on climate change and green finance. Three central banks stated that they have already issued guidelines or regulations on climate financing. Another two central banks referred to policy speeches in which their respective governors emphasized that both the physical impact of climate change and the transition to a low-carbon economy are likely to have first-order economic effects in the country and that climate risks are key challenges for the banking sector.
Policymakers and investors in Asia now face the challenging task of ensuring a structural shift to a low-carbon economy, while concurrently safeguarding economic prosperity and the stability of the financial system. Achieving this goal will require financial markets and institutions to start considering climate-related risks in their financing decisions.