rajeshwar rao : climate implications for central banking remarks by mr rajeshwar rao, deputy governor of the reserve bank of india, at a panel discussion on " climate implications for central banking ", organised by the imf and center for social and economic forum, new delhi, 19 july 2023. * * * good afternoon, ladies and gentlemen, thank you for inviting me to participate in this dialogue and the panel discussion on'climate implications for central banking '. climate change and its impact on us is no longer a distant threat. rising global temperatures, extreme weather events, changing weather patterns and the degradation of ecosystems are threatening our lives and livelihoods. we therefore have to face up to the challenge of climate change sooner, not later. now, it is up to us to deal with this in a calibrated and well - planned manner or deal with it once we are pushed into a corner with little elbow room. therefore, the timing of this dialogue is quite appropriate and provides an opportunity to discuss and deliberate on this issue. climate change poses a threat to our long - term growth and prosperity. it has potential to create shocks to monetary stability, growth, financial stability, the safety and soundness of regulated entities. therefore, keeping in view the theme of today's discussion, in my remarks i intend to focus on the role of central banks in managing the outcomes from climate change. a range of factors would influence how things pan out in future, including changes in climate - related policies and regulations, emergence of newer technologies, and behavioural changes in consumers. to ensure a successful transition to a sustainable future, we need a multi - faceted approach that involves governments, private sector entities, financial institutions, civil society organizations and the public. central banks, typically, are concerned with the questions of monetary policy and growth, of financial stability and regulation and supervision of financial system. in many countries, including india, the central banks are statutorily mandated to pursue a given set of objectives. this means that they should address risks and threats that impact their core mission. climate change does pose such a risk. they must, therefore, manage outcomes which could affect the stability of the financial system and safety and soundness of the financial entities. from a banker's perspective climate risks can impact the macroeconomic outcomes primarily from two channels - i. e., physical risks and transition risks. while physical risks refer to direct outcomes of climatic events, such as wildfires, storms, and floods

around the world have also been developing. we need to undertake a largescale capacity building effort to equip central banks, financial firms, real economy players to understand, assess and plan for the climate issues and related financial risks. only then would they be able to innovate, make strategic decisions, mobilise capital and build effective transition plans for achieving sustainability targets. one very important aspect of this capacity building is going to be the handholding of the smaller firms and msmes to make it easier for them to navigate the transition. another point to note is that we all are in the same boat and action of any one entity will have consequences for all. therefore, global co - operation and collective efforts are very important. an important factor in finding a solution to manage the climate risk is that it needs to account for emission contributions of countries in the past. when we measure the per capita emission instead of absolute emission or consider consumption - based emissions instead of production - based emissions, the high - income countries stand out for their contribution in global co2 emissions. unfortunately, it is also a reality that, while we all face the fury of the climate change, middle and lower income countries bear a disproportionate share of the costs in terms of loss in production capacity, property damage & wealth loss and impact on general health and well - being. any solution, therefore, must factor the cumulative carbon space used by countries. on ground, implementation of various climate finance commitments from advanced economies has been far from satisfactory and the gap between what is being done and what needs to be done is only growing. as against the amount of us $ 100 billion pledged by advanced economies, only us $ 83. 3 billion has been provided in 2020, an increase of just 4 per cent from 2019. this trend needs to reverse. to conclude, dealing with climate change is going to be a long haul for all of us. there are going to be situations and circumstances when other issues and concerns may come into focus and get prioritized, but we should not lose sight of long - term goal of planned and coordinated efforts to deal with the impacts of climate change. the earlier we all act, the better the outcome. thank you. 1 https : / / rbidocs. rbi. org. in / rdocs / publications / pdfs / rcf03052023395faf37181e40188bad3afa59bf3907.