Central Bank Perspective: Promoting Green Finance for Sustainable Economic Development slide image

Central Bank Perspective: Promoting Green Finance for Sustainable Economic Development

The Urgency of Green Policy for Central Banks Achieving climate target is not a mandate for central bank. However, as climate related risks become more apparent and if it potentially hampers the achievement of monetary and financial system stability, central bank needs to take a action in managing the risks. Climate-related Risk Potential Impacts on Monetary and Financial Stability Central Bank Roles Physical Risk Including acute hazards (extreme weather events, heat waves, flood) and chronic hazards (rising sea levels, depleting biodiversity, etc) Transitional Risk Risk resulting from changing regulation, technology and preferences in attempt to adjust into low carbon economy • · · . Monetary Impact Increasing price volatility due to deteriorating agriculture productivity Exchange rate pressure due to changing investor preference and global financial flow Adjustment in monetary policy transmission due to changing valuation of risks Financial Stability Impact Higher credit risk on sectors vulnerable to physical risk Increasing financial risks from stranded assets and revaluation of market instruments • Limited access to finance for carbon- intensive industry Ensuring financial sector resiliency toward climate change impacts Supporting just, orderly, and affordable transition through encouraging sustainable finance and strengthening supporting infrastructure (e.g. data availability & disclosure, awareness, etc) Coordination and synergy with other authorities (domestic and international) in managing climate-related financial risk and harmonizing transition in financial sector
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