Climate one of “top risks” facing insurance industry – Mark Carney

Bank of England chief defends climate risk investigation against “green claptrap” jibe from climate sceptic Lord Lawson

(Pic: Bank of England/Flickr)

(Pic: Bank of England/Flickr)

By Ed King

The Governor of the Bank of England has defended plans to investigate the risks posed by climate change, telling UK lawmakers it is one of the “top risks” facing the financial services industry.

“It’s absolutely essential we discharge our duty to protect policy holders in the insurance industry,” Mark Carney told a session of the House of Lords economic committee on Tuesday.

“In the re-insurance business one of the top risks is climate change – that is the assessed risk of those institutions with money on the line.”

Carney was responding to a question asked by Lord Lawson, a founding member of climate sceptic think-tank the Global Warming Policy Foundation.

Lawson asked why, when the economy was just recovering, Carney had announced plans for research into climate risk.

“There are a whole other lot of remaining problems… wouldn’t it be better if you focused attention on those instead of engaging in green claptrap?” Lawson said.

Report: Finance bodies should assess climate risk, says BoE

The former chancellor was referring to a study commissioned by the Bank last month to explore the various effects climate change could have on financial markets.

Carney told the committee the Bank was committed to understanding the potential impact of climate change on an industry that manages an estimated £1.8 trillion of investments. The review is to be published later this year.

The issue of “stranded assets” is less about climate change and more about transparency, he added. It was important to work out the “reliance on companies of certain types of assets”, particularly if tougher carbon pricing policies were implemented by government.

“The actual adjustment is a product of not climate change per se but government policy. Pricing carbon could have an impact on the value of assets on a balance sheet,” he said.

Last October, Carney warned that the “vast majority” of fossil fuel reserves were unburnable if temperature rise were to be limited to 2C, beyond which scientists say more floods, droughts and rising sea levels could occur.

A ten-year review of natural disasters released by the UN last week found 87% were climate-related, displacing 155 million people since 2008 with total economic losses [including earthquakes] of $1.7 trillion.

Losses that are specifically attributed to climate-linked disasters are costing an average of US$250-300 billion every year, said the UN in a separate study.

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