China Central Bank to Study Impact of Climate Change on Financial Sector
China’s central bank has joined the global conversation on managing the risks of climate change.
(Bloomberg) -- China’s central bank has joined the global conversation on managing the risks of climate change, saying it’ll study the impact on the financial sector and regulatory framework.
A warming climate is a “major factor” that could cause changes to economic and financial systems, and global central banks should stay ahead of the curve to respond to possible impacts, Chen Yulu, a deputy governor of the People’s Bank of China, said at an event on Saturday, according to the central bank’s newspaper Financial News.
Chen said the PBOC will focus on analyzing the influence on different parts of the financial sector and how policy makers should subsequently respond. The bank will also conduct a feasibility study on factoring in the impact into its macro-prudential framework.
Climate change could “trigger declines in the value of collateral and tighten credit conditions,” a scenario that can be amplified by markets and develop into systemic risks, the newspaper quoted Chen as saying. The risks could also weaken the balance sheets of households and companies, reducing the potential growth rate, he said.
China has been active in promoting so-called green finance in recent years, co-founding a network of monetary authorities in 2017 to draw experience from each other, as well as running a project on integrating climate risk into financial supervision. The country is also the world’s biggest green bond seller with a stock of nearly 10 trillion yuan ($1.43 trillion) as of June 2019.
To contact Bloomberg News staff for this story: Yinan Zhao in Beijing at yzhao300@bloomberg.net
To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Karthikeyan Sundaram
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With assistance from Bloomberg