Regulatory bodies in the Asia-Pacific region are magnifying their attention towards climate-related risks, according to the United Nations.
In a significant move towards sustainable economic growth, Malaysia, the Philippines, Singapore, and New Zealand have explicitly included sustainability in their central bank mandates, according to a recent report. However, the report does not specify which international best practices are being followed by the region's regulators.
The Asia-Pacific (APAC) region is currently receiving finance flows of up to $6bn a year, as per the report. Yet, the UN estimates that the region needs approximately $422bn for climate mitigation and adaptation by 2030. Climate risks pose a threat to financial stability in the APAC region, as stated by the UN.
Many regulators in the APAC region are integrating climate considerations into risk modelling, aligning with the framework set out by the Basel Committee on Banking Supervision. Central banks in Hong Kong and Japan are conducting climate stress testing and scenario analysis as part of their financial regulation and oversight.
The UN Environment Programme Finance Initiative (UNEP FI) has noted that the APAC region is vulnerable to the impact of climate change. A policy brief issued by UNEP FI states that strengthened regulatory foundations, informed by industry input and international best practices, will support financial stability while contributing to a broader shift towards sustainable economic growth in the APAC region.
Laura Canas da Costa, the global policy co-lead at UNEP FI, emphasised that a broader and deeper integration of climate considerations into prudential frameworks can support more climate-resilient financial systems.
The trend in the APAC region is towards stronger mandates, greater alignment with international frameworks, more refined risk assessment methodologies, and broader central bank regulatory scope to include environmental risks. However, the report does not provide specific details about the regulatory changes or measures being taken in Hong Kong and Japan.
The APAC region is not alone in this shift. Central banks in China, South Korea, Thailand, and Indonesia implicitly refer to green objectives, according to the report.
Climate change has increased the risk of drought and floods for the APAC region. There is a growing emphasis on climate-related disclosures among regulators in the region. UNEP FI's statement highlights that a more comprehensive approach to climate risks is crucial for maintaining financial stability and fostering sustainable economic growth in the APAC region.
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