Reserve Bank warns climate change posing increasing risk to financial stability
By Katharine Murphy
[...]
The RBA’s financial stability review, released Friday, concluded that while climate change is not yet a significant threat to financial stability in Australia, it is becoming increasingly important for investors and institutions to actively manage carbon risk.
The bank notes Australian insurers are the most directly exposed to the physical impacts of climate change, and points out that inflation-adjusted insurance claims for natural disasters this decade are more than twice what they were in the previous 10 years. It notes “this impact is likely to grow over time”.
[...]
The RBA says banks and other lending institutions are also exposed to physical risks because climate change can result in a decline in the income or value of collateral that they are lending against.
[...]
The RBA concludes that climate change poses a clear systemic risk, but it is not yet an imminent threat to financial stability. But it warns this could change. “Climate change could emerge as a risk to financial stability if it is not properly managed, or if the size of climate-related losses increased materially.
[...]