Accelerating our climate actions together

We are often asked why are we concerned about climate change and what does this have to do with New Zealand’s central bank?

The remits of central banks around the world vary. New Zealand’s central bank, Te Pūtea Matua has a broad remit and is what we call a ‘full service’ central bank. This means we have a broad range of activities to achieve our purpose. We formulate and implement monetary policy, we issue bank notes and coins, we provide liquidity facilities, and we operate payment and settlement systems. Critically, we also have financial stability objectives – acting as a prudential regulator of banks, insurers and other institutions and monitoring the financial system. Our remit is reflected in our legislation as three key areas: economic, financial stability and central banking.

Our responsibilities therefore require us to understand the risks to financial stability. This means one of our ‘lenses’ is understanding risk from the perspective of the institutions we regulate as they are key pillars of our financial system. We also need to understand the environment in which they are operating, global and domestic. We do that in a number of ways – utilising our own expertise, analysis and understanding, leveraging the domestic and global networks we are part of and leaning on emerging and best practice. Lastly and importantly we learn from what we see and hear from our regulated firms directly.

Right now, climate change risk and the drive to understand climate change adaptation and transition is high on the list of risks that our financial institutions are worried about. They are working hard to understand, manage and price these risks.