Gillian Tett reports that a “quiet revolution”is underway by central bankers that could have a bigger impact on climate change policies than the decidedly more boisterous protests of environmental groups like Extinction Rebellion, whose colorful protests snarled London traffic for days.
Central bank climate concerns first surfaced four years ago when Bank of England Governor Mark Carney surprised his staid banking colleagues by declaring that climate change posed a financial stability risk. Shortly thereafter, the Bank of England joined forces with the Banque de France and the People’s Bank of Chinato form a Network for Greening the Financial System (NGFS). Now more than three dozen central banks and regulators have joined as well, covering half of global gross domestic product and two-thirds of the global systemically important banks and insurers.
Two weeks ago, the network published a report, stating that the ‘worldwide economic costs from natural disasters have exceeded the 30-year average of $140 billion per year in seven of the last 10 years.” It also warned that up to 17 percent of all global financial assets could be at risk depending on how quickly the mean temperature of the earth rises.
“Yikes,” says Tett, adding the NGFS’ efforts, “marks a green watershed.” The crucial point, she argues, is that investors and policymakers “need to understand is that this movement is now driven by a fear about the costs of “doing bad” — risk management. More specifically, now that central banks have said the issue is linked to financial stability, no executive can ignore this without facing the risk of shareholder suits.”