WILLEMSTAD/PHILIPSBURG:--- Most often when the topic of climate change is addressed, it refers to the impact on the sea level, a warming climate, less biodiversity, and the changing nature. However, climate change also impacts the economy and the financial sector. Climate-related risks that are derived from climate change, affect the global financial system. Banks e.g. might finance investments that are exposed to climate-related risks. On the other hand, they might be helping the global transition process by providing green finance. Also, the insurance sector might need to consider possible future losses in its calculations of premiums. Hence, the Centrale Bank van Curaçao en Sint Maarten (CBCS) strongly encourages the financial sector and other institutions to (pro)actively integrate mechanisms to mitigate climate-related risk into their existing internal control frameworks, to become more climate resilient.
While a range of methodologies is currently in use and being developed, challenges remain in the identification and estimation of these risks and possible losses, which are related to the long-term nature and unpredictability of climate change. That said, the CBCS is pleased to work on this subject by chairing the climate risk working group of the Caribbean Group of Banking Supervisors (CGBS) with the participating jurisdictions Trinidad and Tobago, Suriname, Jamaica, and Guyana. “It will take a collaborated effort on finding the right mix to promote and address climate risk and green financing within our region”, states CBCS-president Richard Doornbosch.
During a virtual forum organized on climate risk and green financing for the CGBS themed ‘Integrating climate-related and environmental risk into prudential supervision, the CBCS affirmed its commitment to lead the working group in 2022. “The Caribbean financial sector needs to be able to anticipate, prepare for, and respond to hazardous events related to climate change. For example, as seen in Curaçao with tropical storm Tomas in 2010 or in Sint Maarten with hurricanes Irma and Maria in 2017, extreme weather events and their intensity have and will place significant stress on financial institutions, societies, and natural systems, and (collectively) we must be prepared to (financially) face them”, concludes Doornbosch.
The CBCS is looking forward to increasing the local and regional dialogue surrounding climate risk with various stakeholders and other supervisors and deepening awareness on this urgent matter.
Willemstad, 7 December 2021
CENTRALE BANK VAN CURACAO EN SINT MAARTEN
