Central Bank of Trinidad and Tobago governor calls on Caribbean central banks to embed climate risk in supervision and reserve management

The Central Bank of Trinidad and Tobago published a speech by Governor Alvin Hilaire that frames climate change as a macro-financial risk for the Caribbean and argues that central banks should incorporate its effects into monetary policy analysis, prudential supervision and their own operating and investment decisions. The speech highlighted supervisory risks from a feedback loop between climate impacts and financial institutions, including borrower stress and rising insurance pressures in vulnerable areas. It pointed to the Central Bank of Trinidad and Tobago’s introduction of Basel II Pillar 2 requirements in 2020 via the Internal Capital Adequacy Assessment Process, requiring banks to account for climate considerations in assessing capital needs, with reporting commencing in 2022. On the central bank’s own actions, it described work to measure its carbon footprint and implement energy efficiency measures, and noted that the Board approved investing up to 2% of international reserves for environmental, social and governance purposes, with USD 42.8 million invested in sustainable development bonds issued by the World Bank, European Investment Bank and Inter-American Development Bank. Looking ahead, the speech called for more coordinated regional approaches, including a unified Caribbean stance on climate financing discussions that the IMF estimates at USD 100 billion per year, alongside work on a common green taxonomy and expanded climate research and scenario analysis. It also noted the Central Bank of Trinidad and Tobago’s participation in two Network for Greening the Financial System workstreams on scenario design and analysis and supervision.