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

Comments are closed

Just Posted

QUIZ: Put your knowledge of Canada to the test

How much do you know about our country?

Selkirk College offering employees voluntary resignations

The college is canvassing employees for those who may want some time off or reduced work loads

City of Castlegar releases Canada Day video

The video showcases the city’s people, geography and stories

VIDEO: Castlegar students create music video

Twin Rivers Elementary students show off their musical skills

Province releases report on Columbia River Treaty public feedback

Reservoir levels, fair compensation for impacted communities, among many issues raised

‘This year is unlike any other’: Trudeau delivers Canada day address

Sophie Gregoire Trudeau and the Prime Minister release video celebrating the national holiday

PHOTOS: Dual rallies take over Legislature lawn on Canada Day

Resist Canada 153 highlighted colonization and genocide, Unify the People called COVID a hoax

Gov. General honours Canadians for bravery, volunteer service

Five categories of winners presented on Canada Day

COVID-19: Should non-medical masks be mandatory in Canada?

New poll shows Canadians are divided on the rules around mandatory masks

‘A little bit scary for everybody’: Air passengers wary as new rules take effect

Masks or face coverings have been mandatory on flights since April 20

VIDEO: Prince William and Kate chat with B.C. hospital staff about COVID-19

Seven-minute video posted to Youtube on Canada Day

River centre says heavy rains could bring flooding to central, northeastern B.C.

Water levels are already unusually high and river banks can be extremely unstable

Most Read