Failure to tackle climate change in a speedy and effective way could lead to financial instability in Ireland, according to the governor of the Central Bank.
Regulatory policies and supervisory practices must address the risks of climate change, Philip Lane said as he delivered the 2019 Monsignor Pádraig de Brún Memorial Lecture at NUI Galway. The biennial public lecture is held in honour of Monsignor de Brún who served as University president from 1945 until 1959.
Entitled Climate Change and the Irish Financial System, Mr Lane’s lecture focused on the climate-related work agenda facing the Central Bank. He said all sectors of the economy will be affected by climate change, whether through exposure to weather-related shocks or the economy-wide transition to low-carbon means of production and consumption.
These structural changes would require considerable investment by households, firms and the government to retrofit buildings and switch to low-carbon production techniques and transportation methods.
“The economy-wide and societal challenges posed by climate change mean that it is inevitable that the financial system has a central role in managing climate risks and financing the carbon transition,” said Mr Lane.
“Accordingly, the strategic plans of financial firms will have to address climate change. Equally, as the guardian of financial stability and the financial regulators, central banks have a leadership role in ensuring that climate change is a strategic priority for the financial system as a whole.
“We plan to incorporate the carbon transition into our macroeconomic and financial stability assessments. Over time, the carbon transition will be an influential factor in shaping macroeconomic outcomes.”
He added that regulatory policies and supervisory practices must address the financing of the related shifts in the structure of the economy and investments. He noted that households will face several challenges over the coming years.