China’s central bank governor has warned that climate change poses new challenges to financial stability and monetary policy, and that the potential risks to credit, markets and liquidity must be properly assessed and tackled, reported Caixin.
The massive amount of green investment needed to achieve China’s goal of reaching peak emissions in 2030 and carbon neutrality in 2060 will require mobilization of the private sector and market forces as the country’s public finances will only be able to cover a fraction of the hundreds of trillions of RMB likely to be required, People’s Bank of China (PBOC) Governor Yi Gang said in aspeech at the China Development Forum in Beijing on Saturday.
“Studies show that climate change may make extreme weather more frequent and lead to greater loss,” Yi said, according to a transcript of his speech posted on the central bank’s website. “Meanwhile, green transition may cause the value of carbon-intensive assets to fall and sour the balance sheet of firms and financial institutions. This will heighten credit risk, market risk and liquidity risk, and further undermine the stability of the entire financial system.”
“It may also affect the scope and transmission of monetary policy, and be a drag on key variants such as growth and productivity. These are new challenges to financial stability, as they make the evaluation of monetary policy more difficult.”