Bank of England governor: financial risk posed by climate change

Bank of England Governor Mark Carney said investors need to wake up to the potential for huge losses from a sudden shift in regulations designed to curb global warming and the use of fossil fuels.

“The challenges currently posed by climate change pale in significance compared with what might come,” Mr Carney said in a speech at a Lloyd’s of London dinner in the UK capital late Tuesday.

“Once climate change becomes a defining issue for financial stability, it may already be too late.”

Mr Carney is the most prominent figure yet from the world of finance to set out his concerns on how climate-related issues could destabilise financial markets in the years to come.

His remarks prodding the Group of 20 nations to act on the issue also support campaigners led by environmentalist Bill McKibben as well as institutions such as Oxford University and the Rockefeller Brothers Fund, which have pledged to shift away from investments in polluting industries.

“He chose his setting perfectly,” said Stephanie Pfeifer, chief executive officer of the Institutional Investors Group on Climate Change, which represents 110 funds controlling $12 trillion.

“We welcome his focus on more consistent and reliable carbon disclosure that will allow investors to make a more informed assessment of the climate risks in their portfolios.”

The UK central bank has been looking into the economic and financial-stability risks posed by climate change, and Mr Carney spoke as the BOE published a report on the impact on the British insurance industry.

As well as physical and liability risks, UK insurers, which manage almost £2 trillion, also face threats from the re-pricing of investments in fossil fuels in the move toward a lower carbon economy, Mr Carney said.

Bloomberg