Search results

Purpose: This chapter discusses the need for climate change risk mitigation and why it is not the responsibility of Central Banks to mitigate climate change risk.

Methodology: This chapter uses critical discourse analysis to explain why central banks should not have the responsibility for climate change risk mitigation.

Findings: This chapter argues that the responsibility for managing climate change risk should lie with elected officials, other groups and institutions but not Central Banks. Elected officials, or politicians, should be held responsible to deal with the consequence of climate change events. Also, international organizations and everybody can take responsibility for climate change while the Central Bank can provide assistance – but Central Banks should not lead the climate policy making or mitigation agenda.

Implication: The policy implication is that the responsibility for climate change risk mitigation should be shifted to politicians who are elected officials of the people. Also, international climate change organizations or groups can take responsibility for mitigating the climate change risk of member countries. Finally, citizens in a country or region should have equal responsibility for climate change. Climate information should be provided to every citizen to help them prepare for future climatic conditions.

Originality: This chapter propagates the idea that Central Banks should take a lead role in dealing with the problems of climate change. This chapter is the first chapter to contest a Central Bank-led climate change risk mitigation agenda.

Community perception of climate change is a factor in increasing local awareness of climate disaster risk. This encourages more disaster risk reduction actions by the communities themselves, and thus, provides a driver for sustainable community disaster risk management (DRM) initiatives. Using these hypotheses, this chapter assesses whether the communities’ climate change perceptions, awareness of climate hazardous risk, and subsequent actions on DRR enable local DRM capacity to reduce the increasing climate disaster risk. The study conducts household surveys with an original questionnaire in four communities in Cartago City, Costa Rica.

Climate change is projected to bring a range of changes in temperature, precipitation patterns, and sea level. As a result, widespread occurrence of floods, cyclones, droughts, cold and heat waves, etc. are projected with uneven distribution in time and spatial scales (Rosenzweig et al., 2007). These changes can manifest in the form of long-term slow changes in the mean state of the climate and sudden changes in the extremes of the climate (Carter et al., 2007). The sudden severe changes can have high impacts with widespread devastation, severely impacting years of developmental efforts in many vulnerable countries.

Climate change and the COVID-19 pandemic are complex and have multifaceted effects on countries in an unpredictable and unprecedented manner. While both COVID-19 and the climate crisis share similarities, they also have some notable differences. Being both systemic in nature with knock-on and cascading effects that propagate due to high connectedness of countries, COVID-19, however, presents imminent and directly visible dangers, while the risks from climate change are gradual, cumulative and often distributed dangers. Climate change has more significant medium and long-term impacts which are likely to worsen over time. There is no vaccine for climate change compared to COVID-19. In addition, those most affected by extreme climatic conditions have usually contributed the least to the root causes of the crisis. This is in fact the case of island economies. The chapter thus investigates into the vulnerability and resilience of 38 Small Islands Developing States (SIDs) to both shocks. Adopting a comprehensive conceptual framework and data on various indices from the literature and global databases, we assess the COVID-19 and climate change vulnerabilities of SIDs on multiple fronts. The results first reveal a higher vulnerability across all dimensions for the Pacific islands compared to the other islands in the sample. There is also evidence of a weak correlation between climate change risk and the COVID-19 pandemic confirming our premise that there are marked differences between these two shocks and their impacts on island communities.

Purpose: This chapter discusses some policy options that central banks may find useful in dealing with climate change risk in the financial sector.

Methodology: This chapter uses discursive analysis to suggest policy options which central banks can use to deal with the risk of climate change in the financial sector.

Findings: Five policy options are proposed in the chapter, which includes: imposing a climate change capital surcharge; impose a fixed-rate risk capital – based on Tier 2 capital; a reduction in lending to industries whose activities destroy the environment and climate; creating a climate bank; and requiring financial institutions to relocate their important assets to areas less prone to climate change events.

Implication: Several policy experiments are needed to identify the best policy option that works best for each country while taking into account the unique financial sector, financial system, and climate change history of each country.

Originality: Central banks play an important role in regulating the financial sector and in managing its inherent risks, yet there are no studies that suggest policy solutions to help central banks and other financial sector regulators deal with the risk that climate change poses to the financial sector. This chapter suggests policy options that central banks can use to deal with the risk that climate change poses to the financial sector.

The impact of climate disasters (e.g., floods, storms, or landslides), which are generally of low intensity and high frequency, should not be overlooked in developing countries. Global experiences related to the damage due to these disasters indicate that such events can be devastating in communities that are vulnerable to hazardous impacts. Cumulative effects of climate disasters are a sign of a potential catastrophe. Moreover, the recent increase in these events poses additional issues that increase the cost of local public administration, including emergency operation and infrastructure recovery. This chapter explains key problems related to climate disasters that are increasing, particularly in the local area of developing countries, and clarifies the need to incorporate climate disaster risk reduction into public development planning and practice. The chapter also provides descriptions of the research location, approaches of the study, and the structure of this book.

Climate and environment-related financial risks could significantly and negatively impact the financial sector in future, particularly its financing to those sectors adversely impacted by the climate-related risks, low-carbon policies and the transition from traditional energy sources-based economy to a more sustainable system with alternative energy sources. The participatory countries of the Paris Agreement agreed to align finance flows with a low-emission, low-carbon and climate-resilient growth, in order to facilitate achieving the long-term climate goals. The financial sector, therefore, needs to play a proactive role in aligning financial flows. It is, therefore, of utmost importance to study low-carbon finance and climate-related financial risks. This chapter examine how climate change can affect the financial sector. It discusses the concept, nature, measurement of climate risks and climate-related financial risks and associated prospects and challenges in the assessment and the measurement of these risks. It also presents the green financing initiatives and role of central banks and supervisory authorities and their monetary and financial policies in enhancing green financing and redirecting finance to low-carbon activities. In the financial sector, the insurance industry is highly vulnerable to such risks. The banking sector is yet to witness the serious impact of these risks. With the slowing of global economic growth, appropriate policies are needed to encourage banks to provide increased green finance with an adequate profitability. Studies recommend that climate-related risk has a strong potential impact on banks’ loan default rate as well as on the financial stability, there is hence a need to incorporate climate-related criteria and the systemic risk arising out of climate change into banks’ decision-making process and risk modelling and management. There is a need for developing an appropriate methodology for assessing and reducing these risks. Moreover, observers also anticipate a need for cooperation between banking regulators and banks to develop and adopt best practices in the management of environmental risks. The environment-related risks will call forth a multi-country, or regional, research office to collect and compile the required data and undertake analysis to enhance the banking sectors’ understanding of, and capacity to address, potential systemic environmental risks. What is needed is to test the feasibility of incorporating forward-looking scenarios for assessing potential impacts of providing credit to environmentally unsustainable or sustainable activities on financial stability.

This study investigates the reaction to the Securities and Exchange Commission’s (SEC) 2010 interpretative guidance on climate risk disclosures. Issued on February 8, 2010, the release represents one of the few examples of authoritative requirements for environmental disclosure in filers’ 10-K reports. As such, we attempt to determine the effect of the new requirement on companies’ disclosures as well as how the market reacted to the guidance announcement. Based on a sample of 155 large companies drawn randomly from the Fortune 500, we find first, that, as expected, climate change disclosures increased significantly following the release, but overall, the information provision remained quite limited. We further find that, presumably as intended, companies from industries facing greater climate change exposures exhibited significantly larger increases in disclosure (controlling for prior levels of information provision). Finally, we document that the market reaction to the release of the SEC guidance was significantly positive and driven by more positive returns from firms in climate risk industries. We interpret these unexpected findings as potentially being due to investors believing the new requirements were less demanding than might have been anticipated or that they believe firms facing climate risks were in a better position to respond than other companies.

South Asia, home to one-fifth of humanity, perennially has been a disaster-prone region. In 2007, for instance, the Centre for Research on the Epidemiology of Disasters (CRED) reported that out of the top five countries in the world hit hardest by natural disasters, the first two were Bangladesh and India, while Pakistan occupied the fourth position (CRED Crunch, 2008). This was not an exceptional year but generally has been the trend, which highlights the comparative vulnerability of the region to disasters. Two-thirds of the disasters the region experiences are climate related and there have been phenomenal increases in their frequency, severity, and unpredictability in recent times. The severest impacts have been in terms of sea-level rise leading to submergence of low-lying coastal areas and depletion of Himalayan glaciers, threatening the perennial rivers that sustain the food, water, energy, and environmental security of the region. Climate change is surely creating grounds for newer and more severe risks of disasters in the region in the coming years.