extremely difficult to identify, price, allocate, and manage with accuracy. 1 https : / / www. bis. org / review / r151009a. pdf 2 https : / / www. rbnz. govt. nz / research - and - publications / speeches / 2019 / speech2019 - 07 - 11 # fn7 ; https : / / www. rbnz. govt. nz / about - us / the - journey - of - te - putea - matua - our - tane - mahuta in the jargon, ‘ market failure ’ is rife. we simply do not know the true scope and scale of the environmental risks we take on during our daily economic activities. likewise, many of the material costs of our economic decisions are ‘ externalised ’, that is, borne by others including future generations. there is no obvious market or price for selling climate risk, and hence no personal reward for managing it. and market participants often take a short - term, myopic, view in their decision making, pushing longer term problems to the never - never. what this means is that we will never have perfect information on the risks of climate change. however, firms ’ disclosure on how they identify and manage climate change risks greatly assist to sharpen our focus. after all, it is what gets measured that generally gets managed. and it is far often better to imperfectly measure something than ignore it completely. what we already know is that climate change holds far - reaching implications for new zealand ’ s financial system. these implications include physical impacts such as sea level rise and drought. for example, the national institute of water and atmospheric research ( niwa ) estimates $ 12. 5 billion of property is already exposed to extreme coastal flooding in new zealand, and that each 10cm of sea level rise puts another $ 2. 4 billion of assets at risk. 3 climate change also implies transition impacts - such as ‘ flight shame ’ or a shift to plantbased protein that will pose unique challenges for our highly concentrated export economy. agriculture is already staring down the challenge of a triple whammy : emission pricing, changes in consumer demand, and more extreme weather. the reserve bank ’ s climate strategy our climate strategy at the reserve bank has three avenues : incorporating the impact of climate change into our core functions ; managing our direct impact on the climate ; and leading through experience and collaboration. firm disclosure of climate risks assists all three avenues. disclosure will

of the bank ’ s history, advisory committees have been a key element of this process. since 2013, the bank has given a greater role to committees in monetary policy decision making. the governing committee works together to reach a decision on the appropriate setting of the ocr and the key contents of the statement. a further important element of the bank ’ s decision - making process is the opportunity for constant review. since the financial crisis, inflation has persistently been weaker than forecast, and the bank has continually reviewed its forecast performance over this period. recent research has shown that the bank ’ s forecast performance has been reasonable when compared to a number of benchmarks. this suggests that there were no obvious major sources of new information that the bank could have used from these benchmarks in its decision making. even so, the persistent period of weaker - than - expected inflation remains a focus for the bank, and the bank ’ s research program is shedding light on the drivers of low inflation. increasing our understanding of low inflation is a strategic priority for the bank. see : richardson and williams ( 2015 ), ‘ estimating new zealand ’ s neutral interest rate ’, reserve bank of new zealand analytical note an2015 / 05 ; armstrong ( 2015 ), ‘ the reserve bank of new zealand ’ s output gap indicator suite and its real - time properties ’, reserve bank of new zealand analytical note an2015 / 08 ; lewis, mcdermott and richardson ( 2016 ), ‘ inflation expectations and the conduct of monetary policy in new zealand ’, reserve bank of new zealand bulletin, vol. 79. no. 4. march 2016. see : armstrong and mcdonald ( 2016 ), ‘ why the drivers of migration matter for the labour market ’, reserve bank of new zealand analytical note an2016 / 02 ; vehbi ( 2016 ), ‘ the macroeconomic impact of the age composition of migration ’, reserve bank of new zealand analytical note an2016 / 03. see karagedikli and mcdermott ( 2016 ), ‘ inflation expectations and low inflation in new zealand ’, reserve bank of discussion paper series 2016 / 09. bis central bankers ’ speeches