By Business Daily
Climate change is definitely one of the greatest challenges of our century and financial markets are not shielded from the ever-increasing effects of climate change.
Traditionally, central bankers did not wade in the climate change debate with climate change effects always considered more an externality than a pertinent issue within the purview of financial regulation. There is however a new global reality as central banks and other market authorities take a keen interest in climate change and low-carbon transition. A monumental moment was the 2015 speech by Mark Carney, Governor of the Bank of England, where he warned of climate change as a key financial stability risk which if left to chance would lead to the financial crisis with current financial risks due to climate change being in no proportion compared to what is to come. This he called “the tragedy of the horizon” because climate change impacts would be felt beyond the traditional horizons of most financial actors.
Globally, there has been a wide industry effort, especially in banking and insurance to address this issue. Most notable was the development of recommendations by the Task Force on Climate-related Financial Disclosures (TCFD); recommendations that companies would voluntary adopt in disclosing decision-useful, climate-related financial information. Thereafter, many other initiatives have followed including the Network for Greening the Financial System (NGFS); a network initially established by eight central banks and now with 48 members, being most central banks in developed countries.
