On 29 September 2015, the Governor of the Bank of England, Mark Carney gave a speech to Lloyds of London. In it he set out the risk to financial stability from climate change, stating “the challenges currently posed by climate change pale into insignificance compared with what might come”.
He said there were three broad risks to financial stability to consider.
- Physical risks to assets from increasing extreme weather events;
- Liability risks arising from legal action brought forward by those suffering loss and damage from climate change;
- Transition risk resulting from asset stranding due to changes in policy, technology and physical risks.
It was noted in his speach that there is a clear role for financial policymakers to ensure the financial system is resilient to any transition and that it can finance that transition efficiently.
Mr Carney stated that the Financial Stability Board is considering recommending to the G20 summit that more be done to develop consistent, comparable, reliable and clear disclosure around the carbon intensity of different assets. This could include the establishment of a voluntary Climate Disclosure Task Force, which would help with climate change stress testing on forward risks to financial stability.
Nick Mabey CEO of E3G said
“the significance of these announcements by the Governor cannot be underestimated – they mark a key moment in the orderly transition to a stable and prosperous 2°C future”.
Ingrid Holmes a Director at E3G said
“Next stop is Antalya, where we hope the Financial Stability Board will recommend the G20 define a 2016 work programme to advance these recommendations with a clear legislative timetable by end 2016”.
See text of the speech at http://www.bankofengland.co.uk/publications/Pages/speeches/2015/844.aspx