Tshazibana urges urgent climate action amid policy divergence
South African Reserve Bank Deputy Governor Fundi Tshazibana urged central banks and policymakers to accelerate climate action, warning against complacency amid rising physical risks. Speaking at the NGFS Research Conference, she highlighted challenges from policy divergence and structural shifts like AI integration and geopolitical fragmentation.
The rising cost of climate inaction
Tshazibana emphasized that the global average temperature in 2025 reached 1.44°C above pre-industrial levels, with the three-year average at 1.48°C, indicating a multi-decadal average overshoot sooner than predicted.
This sustained heating has upgraded the risk of 'Large-Scale Singular Events' to 'high' as the 1.5°C mark is consistently hit.
Global economic losses from natural disasters in 2024 were US$320 billion, nearly 40 percent higher than the previous decade's average, leading to a rapid withdrawal of insurance coverage and a 'protection gap' threatening financial stability.
The NGFS supports central banks in greening financial markets and bolstering systemic resilience against these immediate realities.
Policy divergence and structural shocks
Central bank policy actions are often tethered to broader government decisions, making it difficult for financial institutions to reduce climate-related exposure if energy policies favor coal.
This challenge is compounded by structural shocks like AI integration and geopolitical fragmentation.
The IEA's World Energy Outlook projects global oil and gas demand to rise for the next 25 years under current policies, while the OECD's Government at a Glance 2025 report shows only three out of 24 member countries have clear mandates for national policy coherence on sustainable development.
This creates 'policy coordination dominance,' where central bank efforts are reactive due to a lack of synchronized responses across other policy areas, as concluded by the G20 Framework Working Group.
A fragmented path forward
Tshazibana's address underscores the critical need for immediate, coordinated climate action, despite the global policy fragmentation and structural economic shifts.
Delaying these incremental steps will only escalate future costs and complexity, making timely intervention essential for financial stability.
Central banks must actively chart this systemic path, integrating climate and nature-related risks within their mandates.