The Bank of England has acknowledged that climate change could have an impact on the financial markets in a research agenda. The paper also notes that the move to a low-carbon economy could leave fossil fuel assets ‘stranded’.
The discussion paper – One Bank Research Agenda – aims to improve the coordination and openness of the Bank’s research.
The research agenda states, “Fundamental changes in the environment could affect economic and financial stability and the safety and soundness of financial firms, with clear potential implications for central banks.”
So far the Bank’s work in this area has primarily focussed on how insurance firms can adapt to the effects of climate change given the likely increasing frequency of extreme weather events. However, the latest papers notes the “impact of environmental change is not limited to the insurance industry”.
The Bank of England highlights two areas where climate change may have an impact on the financial sector. The first is the implications of physical changes in the environment, such as future changes in climate or related issues of resource scarcity, on financial stability and policyholder protection. Considering how these events could be translated into financial impacts on when they will occur is considered key.
The second aspect involves how change to public policy to address environmental risks could affect the financial system.
“Could rapid improvements in renewable energy technology, such as energy storage, or the introduction of new financial instruments to mange environmental risk, affect the financial markets? Is there a risk that carbon-intensive assets may become ‘stranded’ as part of a low carbon transition?” the research agenda says.
The concept of unburnable carbon and stranded assets in the financial world was introduced a few years ago and is now being considered by a range of financial institutions, such as investment banks and pension funds.
James Laeton, research director at the Carbon Tracker Initiative, commented, “Having engaged with the Bank of England around stranded assets and climate risk for several years, it is encouraging to see this major central bank seeing the need to move with the times and understand its role in dealing with one of the major challenges facing our economies today: climate change.
“We hope to see other financial regulators around the world responding in a similar fashion and collaborating on the issue.”
The Bank of England also states that it is important to examine links between central bank polices and environmental risks, such as whether enhanced risk disclosure and reporting environmental risks would be beneficial.
Photo: Rev Stan via Flickr
Like our Facebook Page
Investing in a Sustainable Environmental Future for Northern Virginia
Prominent Trends in Seafood Sustainability in 2022
Can PEMF Help To Improve Plant Growth for Eco-Friendly Gardeners
How the U.S. Government is Promoting Green Energy in the Country
12 Essential Things for Buying Your First Home
Harnessing Sustainability with User-Centric Technology Innovation
Making Your Dream of Having an Eco-Friendly Garden Come True
Tips for Optimal Waste Management in Your Home
The Agricultural Benefits of Weather Stations for Eco-Friendly Farmers
What Makes Online Furniture Eco-Friendly?
7 Eco-Friendly Plant-Based Alternatives for Everyday Products
Top 5 Benefits of Eco-Friendly Cars
Why Eco-Friendly Homes Should Have Outdoor Bathrooms
Merits of Sustainability Reporting: What Every Manager Must Know
Low Emission and Clean Air Zones: What You Need To Know
4 Ways To Build A Sustainable Home
CEO Brian Ladin Explains How The Shipping Industry Is Going Green
A Guide to Eco-Friendly Landscaping
Why Transitioning Your Company to an EV Fleet Makes Sense?
6 Practices for Sustainable and Eco-Friendly Plant Operations
- Features11 months ago
Seven Health and Safety Tips for Eco-Friendly Products in a Green Home
- Energy12 months ago
Eco-Friendly Homeowners Lower Carbon Footprints through Greater Air Conditioner Efficiency
- Features11 months ago
Essential Guidelines for Eco-friendly Moving into new Home
- Features10 months ago
5 Compelling Reasons to Hire an Eco-Friendly Contractor