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 extremely difficult to identify, price, allocate, and manage with accuracy.
1 https://www.bis.org/review/r151009a.pdf 2 https://www.rbnz.govt.nz/research-and-publications/speeches/2019/speech2019-07-11#fn7;  https://www.rbnz.govt.nz/about-us/the-journey-of-te-putea-matua-our-tane-mahuta  3  In the jargon, ‘market failure’ is rife. We simply do not know the true scope and scale of the environmental risks we take on during our daily economic activities. Likewise, many of the material costs of our economic decisions are ‘externalised’, that is, borne by others including future generations.