Central Bank Initiatives Essential for Developing Effective Sustainable Finance Markets

Abstract

Climate change will have major impacts on economies and lives in the near future through “physical” risks and “transition” risks. Physical risks arise from a higher frequency, and greater scale of natural disasters as global warming progresses, while transition risks can drive corporate and sectoral restructuring and an increase in stranded assets in the transition process toward carbon neutrality through climate mitigation policies. These policies include carbon pricing, environmental regulations, the provision of subsidies for low-carbon technology development, and public investment to support decarbonization. Companies should prepare for both rising physical risks and transition risks.