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What is the role of central banks in managing climate change? | London Institute of Banking and Finance

Dr Paul Fisher, well known to many at Climate Alliance has written a very interesting article for the London Institute of Banking and Finance. He asks the question whether central banks should play a role in managing the risks presented by climate change.

The Global Risks Report 2019 | World Economic Forum

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Extreme weather is again out on its own in the top-right (high-likelihood, high-impact) quadrant of the Global Risks Landscape 2019. The year 2018 was another one of storms, fires and floods.19 Of all risks, it is in relation to the environment that the world is most clearly sleepwalking into catastrophe. 

You can download the report here, or go to the WEF webpage for more information.

AICD Director Sentiment Index Survey H2 2018 | Minter Ellison

Directors want action on climate change and renewable energy: For the first time directors nominated climate change as the number one issue the federal government needs to address in the long-term.

Download the full report  here

Download the full report here

Read Minter Ellison’s post which covers the key points identified in the survey and contains links to related media.

You can also download the summary report from AICD’s website.

Key takeouts

Directors want action on climate change and renewable energy: For the first time directors nominated climate change as the number one issue the federal government needs to address in the long-term. 

In agreement on the need for stronger governance: Directors across all industries are focused on governance practices and acknowledge the need for changes to deal with current governance issues.  There is strong support (52%) for an increase in penalties for misconduct and for an increase in funding for regulators (57% support). 

Less optimistic overall: Director sentiment has declined for the first time in 18 months (and was down 8.5 points on the last survey) although it remains positive at +4.2.  The AICD attributes the decline largely to directors feeling more pessimistic around regulation, legal issues and directorship conditions more broadly.

PRA ‘expects’ banks and insurers to report climate risks | Gibson Media

"Insurers and banks are to be expected to manage and report their climate-related risks, according to a draft supervisory statement from the UK’s Prudential Regulation Authority (PRA).

The consultation paper, which was described as “a major step for a regulator of a global financial centre”, says the risks from climate change are far-reaching and foreseeable and require a strategic approach." Read More

Australia's first Business Renewables Centre to help Australian businesses to switch to renewables | ARENA

The Australian Renewable Energy Agency (ARENA) has today announced it will help build Australia’s first Business Renewables Centre to encourage Australian businesses to make the switch to renewable energy.

“The Business Renewables Centre will help in that transition by using its expertise in running programs, entrepreneurship, innovation, education and other sustainability objectives to make it easier for companies and councils to enter the renewables market.”

Business to go it alone on climate policy | AFR

In a salutary indicator of how our politicians have created a vacuum in climate change policy, the Business Council of Australia feels it must provide leadership.

"The nation's energy companies and biggest electricity users have given up on politics and begun backroom talks about a self-regulated package of measures to reduce greenhouse gas emissions, restore energy reliability and improve investor stability.”

Sudden tightening of financial conditions poses a risk for financial stability | De Nederlandsche Bank

The budding economic crises in a number of emerging countries, like Turkey and Argentina, illustrate that a sudden tightening of financial conditions constitutes one of the major risks to financial stability.

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Financial conditions in the developed countries have remained accommodative to date, but a turnaround is possible in these countries, too. The trigger for such a turnaround may be a quicker than anticipated tightening of monetary policy in the United States, but it may also be further escalating trade tensions, or a hard Brexit. These developments are discussed in our Autumn 2018 Financial Stability Report (FSR), published today.

Accommodative financial conditions are fuelling vulnerabilities

Ten years after the crisis, financial conditions in most developed countries are accommodative. Prolonged accommodative financial conditions fuel financial stability risks, however, as they lessen the incentive to pay off debts and stimulate risk-seeking behaviour on the financial markets. If financial conditions were to tighten suddenly, debtors will be severely hit by rising financing costs and financial markets may experience sharp corrections, which may in turn translate into heavy losses in the investment portfolios of financial institutions.

Risks are already surfacing in a number of emerging countries

Particularly in emerging countries with large financial and macroeconomic imbalances, financial conditions have been tightening over the past few months. This has painfully revealed the vulnerabilities that have been building up over time, such as high corporate debts denominated in foreign currencies. All emerging countries may be faced with ongoing capital outflows if investor confidence deteriorates and investors at the same time do not differentiate between vulnerable and less vulnerable countries. In due course, a budding economic crisis in emerging countries may also hit the Dutch financial sector through direct exposures and negative confidence effects.

Rising real estate prices demand attention

Real estate markets in the Netherlands are running at full steam, especially in prime locations. House price rises are driven by the insufficient supply of homes, low interest rates and vigorous economic growth. Easing of the borrowing capacity relative to the borrower’s income is undesirable as this would only serve to fuel overheating in the market. In order to ease the pressure on house prices, the housing supply must be increased, particularly in the middle segment of the rental market. The price increases on the commercial real estate market are being driven mainly by the search for yield among investors. As a result, this market is more sensitive to a turnaround in sentiment. As vulnerabilities often build up in times of economic boom, financial institutions must pay extra attention to monitoring and managing the risks associated with commercial real estate in the period ahead.

Further efforts by insurers remain necessary

This issue of DNB's FSR also discusses the vulnerabilities in the Dutch insurance sector. Although insurers are making progress in developing a future-proof insurance sector, further efforts of insurers, supervisors, and policymakers remain necessary, including successful implementation of the recovery and resolution framework.

Disruptive energy transition stress test

DNB developed a targeted stress test in order to quantify the possible effects of a disruptive energy transition on the Dutch financial sector. The stress test revealed that a disruptive energy transition may induce severe losses for Dutch financial institutions. Governments can prevent unnecessary costs by implementing timely and effective climate policies, while financial institutions should include energy transition risks in their risk management process.

Addressing Climate Change within Disaster Risk Management | Inter-American Development bank

Extreme weather events and climate variability, whether occurring under present or future climate conditions, can have severe consequences for development and pose risks to human health and safety and the environment......Climate change is expected to exacerbate flooding, hurricanes, prolonged drought periods, shifts in precipitation patterns, and extreme heat conditions. Social, ecological, and economic vulnerabilities to such weather events currently exist across LAC.