The Reserve Bank of New Zealand - Te Pūtea Matua (RBNZ) says it is seeking input from financial sector members as it looks to set up new guidance to help address evolving climate-related risks.

RBNZ Deputy Commissioner Christian Hawkesby says recent climate events such as the North Island floods and Cyclone Gabrielle have showcased the impact of climate change and its financial implications.

“The financial stability risks associated with climate change are significant, necessitating an urgent and collaborative response,” Mr Hawkesby said.

“The Reserve Bank of New Zealand is obliged to identify, manage, and mitigate these risks as part of our daily activities.”

RBNZ says the draft guidance suggests financial firms manage climate risks within their risk management framework while ensuring to “give them specific analytical consideration”.

“We are proposing entities develop their capabilities in climate-related scenario analysis and stress testing,” it said.

“It is important for entities to look ahead to a range of plausible future climate scenarios, for example more frequent floods and droughts, in developing actions and targets to ensure that their business model and strategy is resilient.”

The Insurance Council of New Zealand Te Kāhui Inihua o Aotearoa’s latest projections have placed insured losses from the North Island floods and Cyclone Gabrielle at $NZ1 billion ($930 million), and $NZ890 million ($831.76 million) respectively, accounting for two of the costliest catastrophe events in the country’s history.

RBNZ says submissions on the guidance questions within its climate-related risk consultation paper are welcome before June 7.