Which of the following is a feature of the 'Climate-Related Financial Risks' discussion in central banking?
A. Only physical risks matter and transition risks are irrelevant
B. Climate change is completely irrelevant for financial stability
C. Central banks have no role in assessing climate risks
D. Physical and transition risks associated with climate change can affect the stability of the financial system and the transmission of monetary policy
Answer: Option D
Solution (By JKSSB Mock Tests)
Climate-related financial risks comprise physical risks (damage from extreme weather) and transition risks (losses from the adjustment to a low-carbon economy); both can impair financial institutions and the broader financial system.
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