Malaysia Tells Banks to Report Exposure to Climate Change Risk
(Bloomberg) -- Bank Negara Malaysia will start requiring financial institutions to report their exposures to climate risk as global economic losses related to natural disasters reach an annual $160 billion.
The reporting requirement will come after the central bank and Securities Commission Malaysia complete a classification system for green assets, Governor Nor Shamsiah Mohd Yunus said in the text of a speech delivered in Kuala Lumpur on Wednesday. The first draft of that system will be open for industry feedback by the end of this year, she said.
“Climate change does not just threaten polar bears in the Arctic,” Nor Shamsiah said. “It also threatens our socio-economic prosperity here in Southeast Asia. It poses risks to the fiscal position of governments, the viability of businesses and the living standards of individuals.”
Malaysia has had its share of volatile weather events in recent years. In 2014, floods in the northern states of Kelantan and Terengganu displaced 200,000 people and prompted the government to spend more than 2 billion ringgit ($477 million) to rebuild the areas. Massive floods followed in Penang and Kedah in 2017. In 2016, a prolonged drought caused the country’s agriculture sector to shrink 5.2%.
Central banks around the world are grappling with climate risk and how to factor that into their policy-making, from economic shocks of extreme weather to changing migration patterns.
Malaysia’s central bank is taking action against climate change in its own offices. It’s harvesting rainwater, printing fewer new bank notes and converting shredded old cash into productive energy, saving 440 tons of carbon emissions since 2016, Nor Shamsiah said.
“We can no longer afford to just react once the worst has already happened,” she said. “The stakes are simply too high.”
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