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

UPDATED: Man dies in backcountry near Whitewater Ski Resort

The victim was found unresponsive in a tree well Friday

Ktunaxa, supporters celebrate protection of Qat’muk and the Jumbo valley

Speeches, acknowledgements and ceremonies mark an emotional gathering in Cranbrook

FedEx distribution centre coming to Castlegar

Development permit for ground facility before council next week.

Jumbo Valley to be protected, ending decades-long dispute over proposed ski resort

Development rights permanently retired for site of proposed year-round ski resort west of Invermere

Poll suggests some don’t think Canada should send troops to stop genocide

The findings are being released just before the 75th anniversary of the liberation of Auschwitz

B.C. woman crowned the fastest female marathon runner in Canadian history

Malindi Elmore ran an incredible 2:24:50 at the Houston Marathon

Alberta bulldog breeder ordered to give refund to B.C. buyer due to puppy’s behaviour

Tribunal ruled a verbal agreement to send a new dog superseded the written contract

Cariboo Memorial Hospital back to normal after cold weather wreaks havoc

Burst pipes and water leaks cause three different incidents

Dog reunited with Tofino owner, months after being taken from beach

Shannon Boothman ‘ecstatic’ at pet’s return after a tip leads to social media search

Huawei exec’s extradition hearing begins in Canada

China’s foreign ministry complained the United States and Canada were violating Meng’s rights

Prince Harry: ‘Powerful media’ is why he’s stepping away

Prince Harry and Megan have stepped away from their royal commitments

How to beat Blue Monday, the most depressing day of the year

Multiple factors can play a role in seasonal depression, says Fraser Health psychiatrist

Most Read