Our approach to climate change
This page sets out our approach to climate change and why we think this work is important.
Our role in managing risks to the financial system
As kaitiaki of the financial system, our role is to guard the prudential soundness of our regulated entities and the system as a whole.
Climate change poses a direct challenge to financial stability. Climate financial risks includes physical risks (for example droughts or increased flooding) and transitional risks (for example, carbon pricing or legal challenges).
Our main concern is the exposure of the financial sector such as banks and insurers to climate-related risks. Global understanding of climate risks is evolving along with the understanding of how they impact financial stability. Markets move quickly once a critical mass of information is available.
Our activities in the climate space, both in our role as kaitiaki of the financial system and in collaboration with others, can enhance transparency and reduce market failures such as information asymmetry.
Our climate change strategy
Released in 2018, our climate strategy has 3 avenues:
- Monitoring and managing our impact on climate
- Understanding and incorporating the impact of climate change on our core functions
- Providing leadership as an institution.
Financial entities having to disclose their climate risks will help all 3 avenues. Disclosure will enable risk assessment and mitigation, and motivate investment in emissions reduction and adaptation. It will change businesses' behaviour by directing attention to climate-related risks – ‘you manage what you measure’. Investors’ behaviour will also change as they see both climate risks and opportunities.
- Read our climate change strategy (December 2018)
Our submission to the Climate Change Commission Draft Advice
Our response to the Climate Change Commission’s Climate Action for Aotearoa consultation focuses on understanding and addressing the exposure of the financial sector to climate-related risks.
This is the Commission’s first draft advice report to the Government on the steps New Zealand can take to reduce greenhouse gas emissions and address climate change.
We have commented on 5 key areas that are of particular relevance to our remit.
Playing a part globally, and as a leader in the Pacific region, is important both in terms of reinforcing New Zealand’s reputation as a ‘good global citizen’, and in providing us access to the latest thinking around the globe.
We are a member of the Central Banks and Supervisors for Greening the Financial System (NGFS)
We are a member of the Sustainable Insurance Forum.
- A near horizon: Seizing the opportunities and managing the risks in the transition to net zero: The importance of climate-related financial disclosures – Our Governor Adrian Orr speaking at a virtual roundtable attended by Mark Carney (United Nations Special Envoy for Climate Action and Finance) on 28 May 2020
- Progressing climate action by driving transformation change — A speech delivered by Governor Adrian Orr to the 2020 Pacific Ocean, Pacific Climate Change Conference, 28 October 2020
Financial Stability Reports often include the impacts of climate change on financial stability, for example: