Asian central banks are ahead of the green curve

WHILE 2020 will no doubt be remembered for the global outbreak of Covid-19, it was also among the hottest years on record and witnessed unprecedented extreme climate events such as droughts, wildfires, hurricanes and floods worldwide.

Beyond the humanitarian consequences of these disasters, the steadily increasing frequency of extreme climate events pose "green swan" or tail risks to the stability of entire financial systems. Despite this, actions to minimise these risks have, until recently, been rather limited.

Driven in large part by the intellectual leadership of former Bank of England governor and current United Nations Special Envoy for Climate Action and Finance Mark Carney, central banks have increasingly taken cognisance of climate change-related financial stability risks (CRFRs) in light of their role as regulatory institutions entrusted with preserving financial stability.