Climate change: impact on the financial sector
The Bank of Russia invites market participants to discuss the prospects for estimating and monitoring of climate risks in the activities of Russian financial institutions. The regulator also considers it necessary to create balanced approaches to sustainable development, and responsible financing and investment in Russia.
The effects of climate change are taking their toll not only on natural systems and public well-being but also on global financial stability and development. In recent years, the impact of climate risks on financial sector stability has become a topical issue for central banks and financial regulators worldwide. According to the consultation paper (available through the link above), today’s challenge and an opportunity to reduce climate risks in future lies in developing policies that take into account the impact of climate risks on financial market participants and financial stability, encourage investment in low-carbon energy and reducing emissions (including through the issuance of sustainable financial instruments and the development of responsible investment, considering ESG factors).
The Bank of Russia believes that at the moment it will be difficult to establish regulatory requirements for climate risks estimations by Russian financial institutions due to the uncertainity of future climate scenarios and of the impact that climate change will have on the Russian economy. Moreover, there are such problems as the lack of technical knowledge and resources for insurers to perform risk assessment, as well as low availability and quality of data in certain industries.
The authors of the paper believe that state-level continuous monitoring of the said risks and of their possible impact on various industries, supervision and collection of data on climate-related damage and greenhouse gas emissions, together with the Bank of Russia's cooperation with international regulators regarding these issues will promote sustainable development principles in the Russian financial sector.
In turn, Russian financial market participants are invited to improve their skills of identifying, assessing and managing climate risks both in the short and long term. Disclosure of information about sustainable development (including about climate risks estimation) will also raise awareness of potential investors about sustainable financing and responsible investment in Russia.
Discussion participants are welcome to send their responses and proposals on the issues mentioned in the consultation paper to the Bank of Russia through 1 September 2020.