The landmark speech on Climate Change and the Economy (12 March) by Guy Debelle, Deputy Governor of the Reserve Bank, and the APRA climate change survey (20 March) of 38 large entities, across all regulated industries, signal mainstream acceptance of the reality that climate change obliges all of us to take preventive measures and prepare our mitigation strategies in anticipation of adverse events.
APRA’s Information Paper, Climate change: Awareness to action, captures the significance of this economic and political ‘climate change’ in the following terms:
“A critical paradigm shift has occurred due to the work of industry, domestic and international supervisors and regulators, as well as other key stakeholders. Climate change is increasingly seen as a material prudential risk. A shift from awareness towards action in response to these risks is underway.” (p.4)
Mr Debelle’s keynote speech to the Public Forum hosted by the Centre for Policy Development quoted a February 2019 speech by Geoff Summerhayes of APRA, in which he noted that there is a data gap which needs to be addressed:[
‘The challenge governments, regulators and financial institutions face in responding to the wide-ranging impacts of climate change is to make sound decisions in the face of uncertainty about how these risks will play out.’
Mr Debelle then reflects that economists face the challenge of taking the climate modeling and mapping that into their macroeconomic models.
“For businesses and financial markets, that challenge is understanding the climate modelling and conducting the scenario analysis to determine the potential impact on their business and investments“, he said.
The same challenge applies to all not-for-profit organisations as well, and our environmental scanning, strategic planning, and risk management activities all need to include climate change as a key focal area. Reading these speeches and information papers is just part of that response.