By Alice Uribe

SYDNEY – Australia’s central bank and its prudential regulator say they will conduct more analysis and research on climate change, and have pledged to share the knowledge gained with other central banks and regulatory agencies.

The Australian Prudential Regulation Authority and the Reserve Bank of Australia have issued a joint statement on the steps they are taking to ensure that financial institutions and the Australian financial system are prepared to respond to the financial risks of climate change.

“Climate change directly affects the economy and the financial system, and is therefore closely linked to the mandates of APRA and RBA,” they said.

“The physical impact of climate change and the global transition to a low-emission economy will affect economic output, prices and employment. Climate change will be a factor in changing the value of certain assets and income streams, and therefore poses a risk to financial institutions and financial stability.

APRA and RBA said they have developed approaches to understand and manage the financial risks of climate change alongside the Treasury and the Australian Securities and Investments Commission, which collectively include agencies of the Australian Council of Financial Regulators.

“APRA and RBA are also committed to sharing their knowledge based on their experience on climate-related topics with other central banks and regulatory agencies,” they said.

APRA considers that effective decision-making by financial institutions must include full consideration of risks, including the potential impacts of physical climate, transition and liability risks. In 2021, it will finalize prudential guidelines to help supervised entities identify, monitor and manage the climate risks to which they are exposed.

Australia’s central bank plans to conduct an analysis that monitors the implications of climate change and related mitigation policies for the economy and the transmission of monetary policy through financial markets and the banking system to households and businesses.

“The RBA is committed to using the information obtained from this analysis to inform its work to address data gaps related to climate risk, to improve the ability of regulators and financial institutions to assess climate-related risks and opportunities, “said the joint statement.

Both said they were determined to incorporate sustainability factors into their own operations through the use of energy efficient equipment and renewable energy, reducing waste going to landfills and promoting sustainable use and water efficient.

Write to Alice Uribe at [email protected]



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