Global warming has accelerated since 1960 and is likely to intensify. While the relationship between climate change and weather events is still a frontier in science, the increase in global temperatures have been associated with increased frequency and severity of weather events globally. Climate change, if unmitigated, may worsen, with global temperatures projected to rise as high as 1.5 degrees Celcius between 2030 and 20522 (IPCC, 2018).

Climate change and the associated challenges, such as extreme weathers and possible disruptive environment policies have far-reaching implications for the macroeconomy and the financial system. The impact permeates all levels of society, from households to businesses and to policy makers, including central banks and governments. The prevailing COVID-19 health crisis is likely to be a fraction of the possible magnitude, reach and indiscriminate impact on society and activity of the climate crisis.

The Report focuses on climate and environment-related risks from the perspective of central banks, specifically the ACBs. The Report aims to better understand implications of these risks on the ASEAN financial sector and overall economy. Such understanding is crucial for ACBs to formulate the way forward, individually and collectively, to continue safeguarding financial and monetary stability, while supporting the transition to a low carbon region. This Report places emphasis on the ASEAN context and perspectives, as well as the economic and financial sector development needs. It complements ASEAN’s existing efforts to manage climate change and the related risks in the capital market and insurance sectors.