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.

Just Posted

Matti Erickson is Nelson’s first annual Sports Ambassador

Marilyn Hatfield is the 2020 Cultural Ambassador. Heritage and sustainability awards also presented.

LETTER: Speaking up for green burials

From Nancy Radonich of the Nelson End of Life Society

Body found in car at bottom of lake near Needles ferry

Police say at this time no foul play is suspected

RED Mountain resort delays opening day

Lack of snow puts damper on start of season

Civic Theatre uses fundraising push to get back into black

The theatre rebounded after a big financial loss in 2018

‘A loud sonic boom’: Gabriola Island residents recount fatal plane crash

Area where the plane went down is primarily a residential neighbourhood, RCMP say

Thunberg ‘a bit surprised’ to be Time ‘Person of the Year’

‘I could never have imagined anything like that happening,’ she said in a phone interview

B.C. patients wait 41% longer than national average to see a walk-in doctor: Medimap

The longest wait time was found in Sidney, B.C., where patients waited an average of 180 minutes

Toronto Raptors, Don Cherry top the list of Canadians’ Google searches in 2019

‘Champions’ was the theme of the last year, Google said

Tavares scores twice as Maple Leafs earn 4-1 win over Canucks

Vancouver sees two-game win streak snapped

UPDATED: No survivors in Gabriola Island plane crash: RCMP

Coroner confirms multiple fatalities after small plane goes down Tuesday night near Nanaimo

VIDEO: Harbour Air makes history with first electric aircraft test flight

Successful flight marks first of its kind in the world

The Grinch who Stole a Hedge: Security camera captures Chilliwack tree theft

RCMP arrives as person calmly walks away with tree in downtown area

Salmonella outbreak in Canada linked to rodents and snakes

92 cases of salmonella across six provinces, including B.C.

Most Read