The central bank of New Zealand releases a financial roadmap for climate risk management.

With the release of new guidelines targeted at assisting regulated firms in managing climate risks, the Reserve Bank of New Zealand, Te Pūtea Matua, has made a major contribution to the development of a stable financial system in New Zealand.

Tyree Schoen

March 28, 2024

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Te Pūtea Matua asserts that it is aware of the growing risks that climate change brings to the country's economic environment in its capacity as the defender of its financial stability. The Director of Prudential Policy, Kate Le Quesne, claims that financial institutions must exercise careful risk management due to the effects of climate change, which include more frequent and severe weather events and the sustainability of business models in a changing environment.

Rather than providing a one-size-fits-all solution, the recently released Guidance gives banks, insurers, and other regulated businesses a framework to customize how they identify, manage, and track climate-related risks. This initiative is the result of a consultation process that was started in March of last year and resulted in changes to the draft Guidance. Strengther links to the prudential regulatory framework, reduced text to prevent duplication with current rules, and the inclusion of real-world examples are other enhancements.

Furthermore, with the assistance of the External Reporting Board, the Guidance now has a layout that closely resembles the Aotearoa New Zealand Climate Standards. The purpose of this alignment is to streamline the procedure for organizations interacting with both publications, even if the Guidance does not offer direct advice on disclosures relating to climate change.

Te Pūtea Matua has demonstrated its commitment to adapting risk management practises and legislative frameworks in response to climate change through its proactive approach, which has been enhanced by feedback from the sector.

Our expectations for regulated entities' identification, management, and oversight of climate-related risks are outlined in the Guidance. Ms. Le Quesne underlined that the Guidance is not prescriptive and that businesses are best suited to determine how to apply it to their own business models and plans. This strategy reflects a knowledge that, in order to adapt to both present and future climate-related problems, effective climate risk management is essential for the long-term prosperity and well-being of New Zealanders.