THE challenges of climate change should be taken seriously as it would have a huge negative impact on food security and gross domestic product (GDP), BSP Assistant Governor, Policy and Specialized Supervision Sub-Sector Lyn I. Javier said.
In her recent talk before the members of the Bank Marketing Association of the Philippines (BMAP), Javier cited that the World Bank estimates that climate change will create economic damages, which will reach 7.6 percent of the country’s GDP by 2030 and 13.6 percent of GDP by 2040.
The BSP official added that the role of central banks in this situation was highlighted by the former governor of the Bank of England Mark Joseph Carney when he delivered a speech in a major gathering of business leaders in 2015. He said that climate change will cause financial instability.
Javier said climate change will also impact price stability when droughts or floods hit the agriculture sector. She explained these disasters could lead to a shortage in supply that will later result in price increases.
Meanwhile, climate change will affect the operations of banks and financial institutions either directly or indirectly through their clients as they have been exposed to the effects of climate change.
Javier said the BSP has to take action because it recognizes the same risks when implementing their mandate of pursuing price and financial stability.
Along this line, she said, the BSP adopted the “sustainable central banking” (SCB) framework. Javier added this in line with the huge impacts of climate and environmental risks on prices of goods and services and on the stability of financial institutions.
She explained that the SCB framework mandates the BSP to be “an enabler, mobilizer and doer with respect to advocating sustainability in the financial system.”
To get the SCB framework going, Javier said the BSP has to pursue awareness and capacity building Initiatives such as membership in regional or international groups of central banks and supervisors. These include the following: the Network for Greening the Financial System (NGFS); the Sustainable Banking and Finance Network; the Inclusive Green Finance Working Group of the Alliance for Financial Inclusion; Executives’ Meeting of East Asia-Pacific Central Banks Working Group on Banking Supervision; and, task forces or working groups at the Association of Southeast Asian Nations.
Moreover, the BSP also conducted various studies or preliminary insights on sustainable finance. These include a study titled “Impact of Extreme Weather Episodes on the Philippine Banking Sector using Branch-level Supervisory Data” and “Climate Change and Monetary Policy: Some Preliminary Thoughts.” The BSP, she added, also released a report on the roles of Asean central banks in managing climate and environment-related risks.