By Alice Uribe
SYDNEY--Australia's central bank and its prudential regulator say they will conduct more climate change analysis and research, and have committed to sharing the knowledge gained with other central banks and regulatory agencies.
The Australian Prudential Regulation Authority and the Reserve Bank of Australia published a joint statement on the actions they are taking to ensure financial institutions and the Australian financial system are prepared to respond to the financial risks of climate change.
"Climate change directly affects the economy and the financial system, and is therefore closely related to the mandates of APRA and the RBA," they said.
"The physical impact of climate change, and the global transition to a lower emissions economy, will affect economic output, prices and employment. Climate change will be a driver of change in the value of certain assets and income streams, and therefore poses a risk to financial institutions and financial stability."
APRA and the RBA said they had been developing approaches to understand and manage the financial risks of climate change alongside Treasury and the Australian Securities and Investments Commission, which collectively comprise the Australian Council of Financial Regulators agencies.
"APRA and the RBA also commit to sharing knowledge based on their experience in climate-related topics with other central banks and regulatory agencies," they said.
APRA considers that effective decision-making by financial institutions must include a full consideration of risk, including the potential impacts of physical, transition and liability climate risks. In 2021, it will finalize prudential guidance to assist supervised entities to identify, monitor and manage the climate-related risks they are exposed to.
Australia's central bank plans to conduct analysis that monitors the implications of climate change and related mitigation policies for the economy and the transmission of monetary policy through financial markets and the banking system to households and businesses.
"The RBA commits to using the information obtained from this analysis to inform its work on bridging data gaps in relation to climate risks, in order to improve the ability of regulatory authorities and financial institutions to assess climate-related risks and opportunities," said the joint statement.
Both said they were committed to integrating sustainability factors into their own operations via the use of energy efficient equipment and renewable energy, reducing waste arriving in landfill and promoting sustainable and efficient water use.
Write to Alice Uribe at alice.uribe@wsj.com