Adrian Orr: No longer tomorrow's problem - how the Reserve Bank of New Zealand is working with its stakeholders to respond to climate change
Speech by Mr Adrian Orr, Governor of the Reserve Bank of New Zealand, delivered to Chapter Zero New Zealand, Auckland, 3 November 2023.
The views expressed in this speech are those of the speaker and not the view of the BIS.
Central bank speech
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14 November 2023
Introduction
Kia orana tātou kātoatoa, tēnā tātou katoa,
Thank you for again inviting me to speak with members of the Institute of Directors.
I want to begin by acknowledging the mana whenua, Ngāti Whātua Ōrākei.
I'd also like to thank Chapter Zero New Zealand for organising this event and for the work they are doing. You have created a truly meaningful network of business leaders, as highlighted by your recent publication that provides directors' guidance in the development, analysis, and review of climate scenarios.
In my inaugural speech as Governor in 2018, I spoke about the perils of short-termism in economic and business decision making. Taking a short-term view means we risk ignoring social and environmental harms (or negative externalities), leaving them as issues for our future selves to resolve.
Former Bank of England Governor Mark Carney termed it a 'Tragedy of the Horizon' citing climate change as the prime example. The need to take a longer-term view when approaching business was one of the reasons the Reserve Bank of New Zealand developed its climate strategy in 2018. We have been working to implement it ever since.
Overcoming Carney's 'Tragedy of the Horizon' doesn't have to be rocket science. For example, as a prudential supervisor, we can help the participants and entities in the financial system to be more aware of the risks and the opportunities in front of them, so that they can prepare for a rapidly changing world.
Today I will talk about:
- Our climate-related work with prudentially regulated entities;
- Our climate and sustainability collaborations domestically and internationally; and
- Our future intentions.
But before I do that, let me start by telling you about what our Act sets us up to do, and the role of central banks in encouraging efficient financial risk management.