RBA’s Kearns warns climate change is expected to impact financial system
(Bloomberg) – A senior Reserve Bank of Australia official said climate change is likely to have a “significant impact” on the structure of the economy, with implications for the stability of the country’s financial system.
“Climate change can significantly affect asset prices if it reduces future cash flows and makes them more volatile,” the RBA’s head of domestic markets, Jonathan Kearns, said on Wednesday in Sydney.
It can also “affect the ability of households and businesses to meet their repayments because of the impact it can have on their income,” he said in a speech. Kearns warned that if financial institutions “mismanage their climate risks, they are also exposed to liability risk”.
Australian governments have struggled to formulate a sustainable policy response to climate change as they have failed to balance the interests of mining and energy companies with the green energy opportunities of a country with vast advantages. solar, wind and other natural benefits. It saw a decade of limited action.
Newly elected Prime Minister Anthony Albanese, aiming to end the so-called climate wars, has pledged to cut emissions by 43% below 2005 levels by 2030. In doing so, he is also trying to rebuild the Australia’s international reputation following widespread criticism of its failure to act on the issue.
A renewed sense of urgency is also being generated by the growing number of climate-related weather events. Australia, the driest inhabited continent in the world, was scorched by wildfires in 2019-2020 and now the east coast of the country has been repeatedly inundated by heavy rains and floods.
Kearns said in his speech that Australian lenders have conducted a scenario analysis of their climate risks with the country’s banking regulator which is expected to release the results later this year. The event Kearns spoke at today is closed to the media and therefore there will be no public Q&A session.
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