Financial regulators from over 30 countries took part in a high-level International Climate Risk Conference for Supervisors on Friday 6 April 2018. The conference in Amsterdam was organised by De Nederlandsche Bank, ACPR, and Bank of England as part of the Central Banks and Supervisors Network for Greening the Financial System (NGFS). The Financial Times, Guardian, Reuters, Responsible Investor & Business Green covered the meeting and the speeches by Bank of England governor Mark Carney and Banque de France governor Francois Villeroy de Galhau.
'Central bank governors from the UK, France and the Netherlands are considering increasing regulatory oversight to address climate-related risks to the financial system, including carbon stress tests for banks' according to the Financial Times.
'François Villeroy de Galhau, head of the French central bank, ... lobbied for compulsory disclosure of EU banks’ and insurers’climate-related risks, penalties for investing in assets linked to high emissions, as well as carbon stress tests for all financial institutions — a measure that would be unprecedented for the banking sector. ... Mr Villeroy de Galhau said a carbon stress test for financial institutions could assess “the probability of default over a much longer horizon than the usual one of one year”. He also said climate-related disclosures could “gradually evolve” to become compulsory, along with a “comply or explain” option that would allow companies to issue an explanation if they decided not to disclose.' (FT)
Mark Carney 'has warned of the “catastrophic impact” climate change could have for the financial system unless firms do more to disclose their vulnerabilities,' report The Guardian ... 'He said the financial industry could be forced into making rapid adjustments if could be forced into making rapid adjustments if they did not gradually expose where their climate change risks might lie, which he said could trigger steep loses. The governor warned of a 'climate Minsky moment', referring to the work of the economist Hyman Minsky, whose analysis was used to show how banks overreached themselves before the 2008 financial crisis.'
Carney also said 'the Task Force on Climate Related Financial Disclosure (TCFD) will continue beyond the Argentine G20 Summit in late 2018 and into the Japanese G20 presidency in 2019' according to Responsible Investor.
Ahead of the meeting the Council for Economic Policy published a discussion paper 'Central Banks and the Transition to a Low-Carbon Economy', arguing central banks should evaluate climate-related systemic risks in the financial sector, implementing higher capital requirements for loans to carbon-intensive economic activities and recognise that current large-scale asset purchases by central banks are biased toward incumbent carbon-intensive sectors, and ensure that climate-related risks are reflected in their own balance sheets and collateral frameworks (22 Mar).
If you want to dive deeper, below a few other pointers from the governors' speeches.
Banque de French governor Francois Villeroy de Galhau in his speech argued that we should:
Bank of England Governor Mark Carney said (full speech, pdf):
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