Bank of Canada governor says climate change poses risks to financial systems

Bank of Canada listed climate change among top economic worries in its May financial system health report

Bank of Canada governor Stephen Poloz wasn’t asked about climate change risks at a discussion about economic change and emerging risks on Thursday, so he brought them up himself.

“It’s about the transition risk, right, as everyone’s portfolio and all their lending practices kind of converge on a different climate trend line, that that could have significant consequences for financial systems,” he said.

“So we need to model that and do stress testing and so on, and so we’re building new tools for that.”

His comments came the same week the Bank of Canada outlined its research priorities on the potential impacts of climate change, including physical risks of intensifying weather, the financial risks of stranded assets, and wider risks to the system of increased volatility and unpredictability.

ALSO READ: ‘Climate emergency’ is Oxford’s 2019 Word of the Year

The report by Miguel Molico, senior research director at the bank’s Financial Stability Department, notes that carbon-intensive sectors like oil and gas could be hurt by significant changes in pricing in a transition away from a carbon economy.

“Maintaining the warming below 2.0 degrees Celsius implies that some of the existing fossil fuel reserves will become stranded assets,” he wrote.

“These transition risks are of particular significance for Canada given its endowment of carbon-intensive commodities, the current importance of some of these carbon-intensive sectors for the Canadian economy, and the energy needs for cooling and heating.”

More frequent or severe extreme weather events, or an abrupt transition to a low-carbon economy could have significant impacts on the Canadian financial system, with potential systemic consequences, he said.

Molico said that while much is unknown about the potential impacts of climate change, its physical effects could reduce global annual GDP by 1.5 to as much as 23 per cent by end of the century.

In May, the Bank of Canada for the first time listed climate change among the top worries for the economy as part of its financial system health report.

Ian Bickis, The Canadian Press

Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Unofficial holidays: Here’s what people are celebrating for the week of Sept. 27 to Oct. 3

World Farm Animals Day, Drink Beer Day and Virus Appreciation Day are all coming up this week

Vancouver Island Indigenous leaders supportive of B.C.’s new plan for old forest preservation

More than 260,000 hectares in Clayoquot Sound mapped for immediate old growth harvesting deferral

HISTORY COLUMN: Reflecting on the 32nd anniversary of Canada’s apology to Japanese-Canadians

Japanese-Canadians an integral part of Tofino and Ucluelet’s history.

Extravagant marriage proposal in Ucluelet

“It was such a dream. He brought a dream to life. No one does this anymore.”

Missing mushroom picker found “alive and well” after three-day search in Ucluelet

“It’s always great to have a positive outcome like this.”

B.C. records 98 more COVID-19 cases, most in Lower Mainland

One new senior home outbreak, Surrey Memorial outbreak over

Vancouver Island Tour de Rock riders roll into Parksville Qualicum Beach

Saturday’s schedule includes Port Alberni, Ucluelet and Tofino, followed by Nanaimo on Sunday

Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

PHOTOS: 2nd calf in a month confirmed among Southern Resident killer whale pod

Center for Whale Research said they will eagerly await to observe the calf to evaluate its health

97 distressed horses, cats and dogs seized from farm in Princeton

RCMP assisted as BC SPCA executed search warrant

$250K reward offered as investigation continues into Sea to Sky Gondola vandalism

Police also asking for specific footage of Sea to Sky highway around time of incident

Most Read