Why Central Banks in Asia Must Take Climate Change Seriously

By Anshul Dash

The United Nations Framework Convention on Climate Change (UNFCCC) has claimed that due to the exponentially growing population and the high amount of natural disasters, climate change will have a disastrous impact in Asia. Many rivers in Asia, such as Yangtze, Mekong, and Brahmaputra, can change in behavior due to the melting of glaciers from global warming. The World Bank has predicted that due to rising global temperatures, living conditions in South Asia will worsen, directly impacting agriculture there. Despite these accurate predictions, Asia has not responded and its energy consumption habits remain the same.

The industry in Asia is rapidly evolving. The demand for energy has increased by 80 percent since 2000. These demands require double the amount of fossil fuels, which is causing financial troubles for power plants in Southeast Asia. Despite increasing demands for biofuel, oil still dominates the region. Coal production is also expected to increase in order to fuel new coal-powered power plants. However, there are many obstacles in the way of achieving this goal, such as complications to safeguard competitiveness in financing new coal plants.

People in Asia who hold stocks in these industrial companies are facing trouble in making sure that there is a smooth transition to a low-carbon economy. Central banks can learn to become more climate-friendly through multiple methods. For single organizations, they can evaluate the risks that come with the changing climate. Central banks in developed countries have already started using this tactic. Organizations can also apply policy tools in order to promote low-carbon actions/efforts and minimize climate risks. Addressing climate change as a risk regularly will encourage these banks and industries to take action and contribute to its mitigation.

While there are many areas under the stress of climate change, testing in these areas will need the support of banks and industries in the area to address these risks. As a result, the development will be more proficient and new methods on how to do low-carbon productions will be developed more quickly. Officials are now focusing on how these approaches should be launched in each central bank as each one operates differently and have different ways of mitigating climate change. To prevent any financial problems, officials have also recommended that an effective framework and economic policy be created to prevent these problems. Climate change can end more quickly with the contribution of these central banks and industries in Asia.