WELLINGTON, (Reuters) – New Zealand’s central bank announced Tuesday it will reduce its exposure bonds to Australia and other countries with a greater carbon footprint. It also outlined measures to mitigate the risks of climate change.

Governor Adrian Orr stated that the Reserve Bank of New Zealand’s carbon footprint (RBNZ), as it holds more Australian bonds and Canadian bonds than the G7 benchmark, is greater than that of an average weighted bond holding.

Orr stated that the bank receives higher yields on bonds from Canada or Australia than elsewhere.

Orr stated, “So yeah, we’d need to look at how we could achieve the same efficiency in our balance while having a smaller footprint.”

He said, “That’s precisely the choice faced by so many investors around the world right now.”

Orr pointed out that the Swedish central bank sold off bonds https://www.reuters.com/article/us-canada-bonds-sweden-idUSKBN1XN2O9 from the oil-rich Canadian province of Alberta and parts of Australia in 2019 because it felt that greenhouse gas emissions in both countries were too high.

Guy Debelle (RBA) was the Deputy Governor of Reserve Bank of Australia. He warned this month that Australia might face higher capital costs as well as divestment from offshore funds if they don’t do more about climate change.

Orr stated that RBNZ would be proactive in investing in green bonds and will consider doing so.

Orr explained that “there is nothing to stop us receiving green bonds” and also nothing to prevent institutions from issuing green bonds more than we can receive.

RBNZ invested https://www.reuters.com/article/newzealand-economy-rbnz-idINL2N2NK009 US$100 million in the Bank for International Settlements’ U.S. dollar Green Bond Fund in 2019.