New Zealand central bank issues guidance on managing climate-related risks

WELLINGTON - The New Zealand central bank has published a guidance for regulated banks and insurers on managing climate-related risks.

The guidance sets out expectations of how regulated entities should be identifying, managing, and monitoring climate related risks, Kate Le Quesne, Director of Prudential Policy of the Reserve Bank of New Zealand (RBNZ), said on Tuesday.

"As climate change poses risks to the stability of the financial system, we have a role to play in ensuring entities manage their climate-related risks," Le Quesne said, adding RBNZ is responsible for maintaining a stable financial system to promote the prosperity and well-being of New Zealanders.

She cited examples such as insurers facing unexpectedly large claims because of more frequent and more severe adverse weather events, and banks seeing growing losses on loans to companies whose business models are no longer viable as the climate changes.

The guidance is not prescriptive, as entities are best placed to decide how to apply it to their business models and strategies, Le Quesne said, adding this follows a consultation on a draft guidance in March 2023 and is one of the actions set in the National Adaptation Plan.

As risk management practices, climate-related risks and legislation are ever-evolving, the guidance will continue to be updated from time to time, she said. - XINHUA