In a , Mark Carney told a gathering of leading insurers this week that the threat posed by climate change would "pale in significance compared with what might come". The failure to rein in greenhouse gas (GHG) emissions would saddle future generations with potentially unmanageable costs.
Following the launch of on the issue, Carney told insurers they should stress-test the effect of weather-related disasters on their balance sheets, and revamp investment portfolios to shrink their contribution to manmade climate change.
The Bank of England governor also revisited a theme he highlighted on several occasions last year, namely the of carbon-intensive companies to future regulation and costs related to climate change.
welcomed Carney's latest statement. His call is also seen as particularly timely as pressure mounts on the private sector to support efforts to negotiate a meaningful deal in Paris.
“Mark Carney spoke under the Lutine Bell, the way Lloyd’s has signalled great events that will affect the market. He chose his setting perfectly. 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,” said Stephanie Pfeifer, CEO of the Institutional Investors Group on Climate Change.
A last week said that financial institutions worth US$2.6 trillion, including pension funds and private companies, have pulled out of investments in fossil fuels, freeing up more capital for investment in low carbon energy. Warnings that the resources sector, and the companies that invest in them, could be saddled with big losses if the world moves to cut carbon have resonated strongly this year.
Demand for coal in China has slowed sharply as the world's largest consumer of the fuel tries to tackle pollution caused by the use of fossil fuel in power generation. However, an economic slowdown, new additions of renewable energy to the power grid and a plentiful supply of hydro power have also contributed.
Companies involved in the production and transport of fossil fuels, and energy-intensive materials, such as steel and cement, have cancelled new projects and shuttered existing capacity amid .
The meltdown this week in the share price of , one of the world's biggest commodities companies, was a further reminder of the parlous state of the sector. However, producers claim prices for fuels, such as coal, in view of curbs in supply and demand from rapidly industrialising economies, such as India. And gas producers continue to talk up the prospects of a fuel that is cleaner-burning than coal, albeit a major source of GHG emissions too.
But supporters of the divestment campaign point to in the power generation mix decisively towards renewables in large economies such as China, US and the EU. A trend they say will render many fossil fuel producers uneconomic in the future.
Bank of England governor Mark Carney tells leading insurers that climate change could become a major cause of financial instability