Regulators in the Asia-Pacific region are intensifying their attention towards climate-related risks, according to the United Nations.
The United Nations (UN) has highlighted the urgent need for approximately US$422 billion by 2030 for climate mitigation and adaptation in the Asia-Pacific (APAC) region. This significant figure underscores the region's vulnerability to the impact of climate change and the need for substantial investment in sustainable initiatives.
In response, central banks across the APAC region are increasingly acknowledging the importance of sustainability. Malaysia, the Philippines, Singapore, and New Zealand have explicitly included sustainability in their central bank mandates, while China, South Korea, Thailand, and Indonesia implicitly refer to green objectives. Central banks in Hong Kong and Japan are already conducting climate stress testing and scenario analysis to better understand and manage climate risks.
The UN Environment Programme Finance Initiative (UNEP FI) has noted a growing trend towards stronger mandates for central banks in the region, with a broader scope to include environmental risks. The Reserve Bank of Australia and the Monetary Authority of Singapore have already expanded their mandates to include environmental risks, and central banks like the Bank of Japan and the People’s Bank of China are actively working on integrating environmental aspects into risk models consistent with the Basel Committee on Banking Supervision’s framework.
The UN has stated that climate risks pose a threat to financial stability in the APAC region. To address this, there is a growing emphasis on climate-related disclosures among regulators in the region. Many regulators are integrating climate considerations into risk modelling in a way that is consistent with the Basel Committee on Banking Supervision’s framework.
However, current finance flows into the APAC region are only up to $6 billion a year, significantly less than the estimated need for climate mitigation and adaptation. The UNEP FI has also issued a policy brief stating that the APAC region is very vulnerable to the impact of climate change. To support financial stability while contributing to sustainable economic growth, UNEP FI emphasises the need for strengthened regulatory foundations, informed by industry input and international best practices.
The report does not mention any new information about the variation in central bank mandates in terms of addressing the impacts of climate change or any new estimates for the amount of funding needed for climate mitigation and adaptation in the APAC region. Nevertheless, the emerging trend towards a broader and deeper integration of climate considerations into prudential frameworks in the APAC region offers a promising step towards addressing the challenges posed by climate change.
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