Bank of England governor Mark Carney warns of financial risk posed by climate change

Joe Hall
Follow Joe
Mark Carney said investors could face huge losses from tougher climate change rules (Source: Getty)

Bank of England (BoE) governor Mark Carney has warned the City of climate change's threat to economic stability.

Read more: Tackling climate change is possible without hindering economic growth

Carney used a speech at a Lloyd's of London dinner to give a stark warning of the huge risks to financial security posed by global warming.

He pointed to the rising costs to insurers caused by weather-related events in recent decades and the numerous future risks to investors' assets.

"Since the 1980s the number of registered weather-related loss events has tripled," said Carney.

"Inflation-adjusted insurance losses from these events have increased from an annual average of around $10bn in the 1980s to around $50bn over the past decade. The challenges currently posed by climate change pale in significance compared with what might come."

The governor warned that as the effects of climate change lie beyond typical business and political cycles of two to three years, actors too often had no direct incentive to grapple with the issue.

He said: "Once climate change becomes a defining issue for financial stability, it may already be too risks are a function of cumulative emissions, earlier action will mean less costly adjustment."

Carney stopped short of saying that the BoE itself would intervene on the issue but said it had a clear interest in ensuring the financial system would be resilient to the wider effects of climate change.

His speech was welcomed by Mark Campanale, founder of the Carbon Tracker Initiative think tank.

"Investors will sit up and take notice of the potential risks and liabilities these companies face and begin to re-price this material risk," said Campanale.

"Fossil fuel investors face the combined risk of their business models being out-competed by price competitiveness of the renewables energy sector, while also potentially picking up the costs of climate damage.”

Related articles