RBA Review submission: Equipping the RBA for a dynamic climate risk and transition response

Equipping the RBA for a dynamic climate risk and transition response is a submission to the Commonwealth Treasury Review of the RBA, from CPD’s Sustainable Economy Program.

The report recommends that the RBA review update the central bank’s legislative mandate to consider sustainability, climate risks and opportunities, and the maintenance of net zero carbon emissions.

Short of a full legislative update, the submission also suggests other ways the government can clarify its expectations around the interactions between monetary policy, climate policy, and fiscal policy.

Recommendations also include an expanded role for green bonds in line with international practice, more advice from the Bank on economic responses to climate change, clear risk disclosure, and tighter expectations on corporate bond issuers.

The Reserve Bank is governed by a 63-year-old law that requires the RBA Board to contribute to economic prosperity and welfare. It makes sense to account for the realities of climate change and the need for a swift, just and orderly transition to net zero emissions to maintain the stability of the financial system.

The submission draws on CPD’s history of work on the economic and legal frameworks needed to navigate climate change.  In 2019, CPD hosted then-RBA Deputy Governor Dr Guy Debelle in a landmark speech on the economy and climate change.

The authors of the submission are Toby Phillips, Tom Arup, and Mara Hammerle.