a near horizon seizing the opportunities and managing the risks in the transition to net zero : the importance of climate - related financial disclosures remarks delivered to a virtual roundtable on 28 may 2020 by adrian orr, governor 2 the terrace, po box 2498, wellington 6140, new zealand telephone 64 4 472 2029 online at www. rbnz. govt. nz talofa lava, tena koutou katoa, welcome everyone thank you to the organisers – mcguinness institute, simpson grierson, and the climate disclosure standards board – for gathering us all for this important discussion. thank you also to mr mark carney. i want to acknowledge your role in shifting the global financial system to a more sustainable perspective. you shook us awake with your ‘ breaking the tragedy of the horizons ’ 1 speech in 2015. now, only five years on from your speech, a common topic across central banks and financial regulators more broadly is how can we best assess and address climate risks. i also acknowledge the climate change minister, james shaw, and his personal commitment, financial expertise and leadership on this very important issue. today i will speak briefly to three points : why climate matters to new zealand ’ s financial stability ; the reserve bank ’ s climate strategy ; and the impact of covid - 19 in terms of risks and current opportunities. why climate matters - new zealand ’ s financial stability we use the maori legend of tane mahuta to tell the story of the reserve bank ( te putea matua ). tane mahuta – god of the forest and birds – separated the earth mother ( papatuanuku ) and sky father ( ranginui ) so that the sun could shine in and life could flourish. thereafter, tane mahuta served as the kaitiaki ( guardian ) of the forest ecosystem – protecting against threats and enhancing the wellbeing of everyone within it. hold on to that image of tane letting the sunshine in – i ’ ll get back to it. at the reserve bank, we are the kaitiaki of the financial system tasked to maintain and enhance financial stability. assessing material risks to banks and insurers, and the financial system as an ecosystem, is our core business. we see financial stability being best maintained when all relevant risks are adequately identified, priced, and allocated to those best able to manage them2. climate change and its associated risks provide a direct challenge to financial stability. the risks are material but

of enhanced financial stability. we will keep going harder on climate. as a member of the network for greening the financial system we are working with 66 central banks, supervisory agencies and international financial institutions to develop a coordinated response to climate. as part of this, we are looking at options for better managing our own balance sheet to mitigate climate change risk and promote climate change adaptation more broadly in new zealand. the impact of covid - 19 like climate change, covid - 19 highlights interdependencies between economic prosperity, environmental sustainability, and social inclusion. covid - 19 has done something climate 4 https : / / www. rbnz. govt. nz / financial - stability / financial - stability - report / fsr - may - 2019 / industry - survey - on - the - potential - impacts - of - climate - change change has struggled to do : engage everyone on earth. we have all been disrupted. as the economist newspaper noted last week : “ following the pandemic is like watching the climate crisis with your finger jammed on the fast - forward button. ” our current response to covid - 19 in new zealand shows that when the risk is acute, we can act together in a powerful, effective response. this is motivating : with climate change the risk is also acute. the current economic regeneration challenge requires bringing forth opportunities to reduce carbon emissions and adapt. we need to ensure that whatever we rebuild, reshape or invest in now is sustainable, long term in its horizon, helps us build climate resilience, and benefits generations to come. the task is significant but, as has been said, ‘ the best time to plant a tree is 20 years ago. the second best time is now ’. conclusion i ’ ll return to tane mahuta and his efforts to let the sunshine in so life could flourish. disclosure is a tool to let in the sunshine. better information to make better decisions. the degree to which climate change remains a ‘ tragedy of the horizons ’ depends on our ability to make better decisions today. thank you.