As published on independent.ie, Wednesday 17 February, 2021.
THE deputy governor of the Central Bank of Ireland (CBI) has said that directors of regulated financial firms now need to start providing evidence that they are "meaningfully" considering climate change risks.
In a lunchtime address to the Institute of Directors, deputy governor for prudential regulation, Ed Sibley, said that the CBI would "become increasingly active and intrusive in its approach to the supervision of climate change risks".
He said that from now on board members would need to provide evidence to regulators that they were incorporating climate change into risk management models and business stress tests.
He added that financial firms would also be required to prove they were taking steps to mitigate their own climate impact in line with the EU's "taxonomy of sustainable activities".
This was in line with the European Central Bank's recently announced strategy review, which is assessing how climate change and environmental risks are relevant to its monetary policy mandates for price stability and controlling money supply.
Mr Sibley said it was clear that the macro-prudential policy, economic advice, financial stability, and consumer and investor protection implications of climate change put it firmly in the bailiwick of central banks and regulators.
He drew parallels between the lack of preparation for the pandemic across political and economic systems and a similar detachment from the predictable consequences of other visible risks, including climate change and technological disruption.
"It is worth asking ourselves, is it possible that the Covid-19 pandemic is not just a seismic and tragic event, but a stark warning too?" he said .
"It is worth us reflecting on how we think about future events that have a near certainty of occurrence over time, but with some doubt about precise timing and impact."
He said the costs of deferred or inadequate action on climate risk would continue to grow, but that the response from businesses and other actors was "woefully inadequate". He attributed the limited engagement by business leaders on climate change to an in-built optimism about the future that needed to be challenged.
"We should also recognise that there is power in negative thinking – testing our assumptions, considering what could go wrong and considering what we will do if things do go wrong," he said.