• Market Watch

Climate change affecting central banking decisions - !Gawaxab

• 5 Hours Ago

Bank of Namibia governor Johannes !Gawaxab says climate change has a negative bearing on how central banking agencies are able to effectively fulfill their mandates, and it affects the financial stability of banking and non-banking sectors.

He made the comments at the central bank's first ever summit on green finance.

"Climate change has far-reaching implications, not just for the environment, but also for economic stability. It is affecting the monetary policy decisions of central banks, influencing financial stability of the banking and non-banking financial sector, and threatening economic performance. In 2023 alone, global damages from natural catastrophes surged to a staggering US$280 billion, a figure that has more than doubled over the past two decades," !Gawaxab said.

It would be amiss to discuss natural catastrophes without including green finance in the same conversation, the central banker noted.

"As we face the dual pressures of environmental degradation and associated economic instability, it is imperative that we, as custodians of the financial system, integrate sustainability at every level. Today, we are not just discussing sustainability including green finance as a separate, isolated issue, but as a core pillar of our national development and financial strategies. It is only through a concerted effort that we can mitigate the economic risks posed by climate change, while simultaneously seizing the opportunities for sustainable growth."



Balancing act

According to !Gawaxab, inflation - especially climate-induced inflation - required a fine balancing act to manage, especially when coupled with high unemployment and weak economic conditions. "The climate crisis further affects food security, agricultural productivity and causes severe damage to homes and critical infrastructure. These disruptions are reminders that sustainability is no longer a choice, but a necessity."

He noted that it was up to central banks the world over to take responsive action towards climate-induced catastrophes that would impact macro-economic conditions such as inflation.

"To navigate these mega-trends, we cannot fold our hands and wait for external help. We need to take bold steps to reshape and re-imagine the financial system, and indeed the broader economy, working to align it to our national goals of sustainability and build the necessary resilience in the face of such threats. Together, the Bank of Namibia, the ministry of finance, the Namibia Financial Institutions Supervisory Authority and the entire financial sector have taken initial steps to establish a coordinated forum to speak with one voice on these issues, and advocate for sustainability within the financial sector and the economy," he said.

Set to be launched in the coming weeks, this platform will foster coordination and collaboration on sustainability matters, enabling financial institutions to both mitigate climate risks and seize opportunities presented by the green transition, !Gawaxab added.