In an article published in the Guardian on Wednesday aimed at the international financial community, Mark Carney, the Bank’s governor, and François Villeroy de Galhau, the governor of the Banque de France, said financial regulators, banks and insurers around the world had to “raise the bar” to avoid catastrophe.
“As financial policymakers and prudential supervisors we cannot ignore the obvious physical risks before our eyes. Climate change is a global problem, which requires global solutions, in which the whole financial sector has a central role to play.”
Climate change poses significant risks to banks and insurers from rising instances of catastrophic weather-related events, such as heatwaves, droughts and floods, which could land them with significant losses.
There are also risks for financial firms as governments accept the need to tackle climate change because banks that have lent to companies reliant on burning fossil fuels run the risk of steep financial losses.
Carney has previously warned that plunging sales of diesel cars, due to new vehicle emissions tests and changes in the tax system, which have had knock-on effects for manufacturers and the wider economy, are an example of this in action.
The open letter from Carney and De Galhau accompanies the launch of a report from the Network for Greening the Financial System (NGFS), an international group of central banks and financial regulators, outlining the steps necessary for financiers to tackle climate change.