TOKYO: Bank of Japan Governor Haruhiko Kuroda said on Wednesday climate change is among the biggest challenges facing the global economy, joining a growing debate about how policymakers should address the growth risks posed by global warming.

Kuroda, former head of the Asian Development Bank, said some regions in Asia are particularly vulnerable to the economic consequences of natural disasters resulting from climate change.

“Climate change, how to realise a green economy … These issues are really huge and I must say the most challenging issues faced by the global economy,” Kuroda said in a virtual meeting of the U.S. National Association for Business Economics.

Central banks around the world have recently raised their awareness on the financial and economic risks posed by extreme weather, but the topic is rarely addressed by BOJ policymakers.

The global community must offer aid to smaller island economies vulnerable to rising sea levels, while striving to develop alternative energy and reduce greenhouse gas emissions, said Kuroda.

“These kinds of efforts are needed not only in developed economies, but developing and emerging economies,” he said.

The financial sector must also step up efforts to make the banking system more robust and resilient to risks from climate change, Kuroda said.

In a report issued in January, the Bank for International Settlements warned of the potentially huge effects of climate change on the world’s financial system.

The European Central Bank said last month it will from next year accept as collateral green bonds with payouts linked to sustainability targets.

The BOJ has in place a lending facility that offers cheap funds to commercial banks that extend loans to businesses with growth potential, including environmentally friendly projects.

But Kuroda has said the BOJ has no plans, for now, to buy green bonds – a category of fixed-income securities that raise capital for projects with environmental benefits.

Reuters