Just how damaging does climate risk stand to be, though? Early stress tests by central banks and disclosures of companies are starting to shed light on the question. For the most part, the evidence that it could bring down the financial system is underwhelming. But a lot hangs on whether governments set out a clear path for reducing emissions, such as through carbon taxes and energy-efficiency standards, giving banks enough time to prepare.
The second channel is financial firms’ exposure to the hazards of rising temperatures. Attributing individual natural disasters to climate change is tricky, but the Financial Stability Board, a group of regulators, estimates that global economic losses resulting from weather-related catastrophes went from $214bn in the 1980s, in 2019 prices, to $1.
The value of financial assets exposed to transition risk is potentially very large. According to Carbon Tracker, a climate think-tank, around $18trn of global equities, $8trn of bonds and perhaps $30trn of unlisted debt are linked to high-emitting sectors of the economy. That compares with the $1trn market for collateralised debt obligations in 2007, which were at the heart of the global financial crisis. The impact of losses, however, would depend on who owns the assets.
Those findings are consistent with an exercise by the Dutch central bank in 2018, which found that the impact on Dutch financial firms from transition risks was “manageable”. In its most severe scenario there was a sudden change in climate policy alongside rapid progress in renewable energy development, causing a “double shock” for companies and a severe recession. Even then, banks’ capital ratios fell by about four percentage points.
Source: News Formal (newsformal.com)
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Only in your little imaginary world!
Repairing damages creates jobs and the catastrophes lead to more social unity in a fractured world.
i`m gonna start selling wellies and rain coats. i`ll be rich.
thanks
Etonian boys club funded by tax avoiders. Banks have had enough time to prepare, they chose to keep investing in fossil fuels.
Mark Carney, the former governor of the Bank of England, warned of financial risks from climate change as long ago as 2015
We shall see nonetheless..
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