The governor of the Bank of England has warned of the “catastrophic impact” climate change could have for the financial system unless firms do more to disclose their vulnerabilities.
Telling banks and insurers they would need to provide more information about the risks they might face from climate change, Mark Carney said failure to do so would have damaging effects for financial stability.
He said the finance industry could be forced into making rapid adjustments if they did not gradually expose where their climate change risks might lie, which he said could trigger steep losses.
The governor warned of a “climate Minsky moment”, referring to the work of the economist Hyman Minsky, whose analysis was used to show how banks overreached themselves before the 2008 financial crisis.
“Given the uncertainties around climate, not everyone will agree on the timing or scale of the adjustments required … [but] the right information allows sceptics and evangelists alike to back their convictions with their capital,” Carney said.
Speaking at a summit of central bank governors in Amsterdam, Carney said there were growing opportunities for firms to finance the transition to a low carbon economy. He said new technology investments and long-term infrastructure projects would need to be financed at roughly quadruple the current rate.
His intervention comes as Threadneedle Street ramps up its assessment of how well insurers are identifying, measuring and mitigating weather-related risks this year. Insurers were exposed to steep losses by extreme weather events, such as Hurricane Harvey, in the US last year.
source:-theguardian
