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 says climate change poses risks to financial systems

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

The Sooke School District is actively looking for more bus drivers after they had to cancel a handful of bus routes in late November. (Black Press Media file photo)
Bus driver shortage cancels routes in Sooke School District

More drivers needed to accomodate expanding bus routes amid pandemic

Joe Robertson and Jack Amos ran the length of Vancouver Island, with the help of their van Pippi, raising more than $12,000 for 1Up Victoria Single Parent Resource Centre. (Photo submitted)
Greater Victoria pair finishes running length of Vancouver Island a day early

Joe Robertson and Jack Amos raised more than $12,000 for single parents

The Sooke Santa Run will feature their youngest members as Santas, an annual tradition for the firefighters in Sooke, East Sooke, Shirley and Otter Point. The drive-by event takes place throughout the Sooke neighbourhood on Dec. 12. (File - Sooke News Mirror)
No one outside fire hall allowed to help volunteer for Sooke Santa Run

Drive-by event takes place on Dec. 12, with goal to raise $15,000

A West Shore man has been handed two tickets for failing to wear a mask after verbally abusing staff at a coffee shop in View Royal and gas station in Langford. (THE CANADIAN PRESS/Darryl Dyck)
Man ticketed twice for refusing to wear mask in same day, say West Shore RCMP

Police ask businesses to report incidences when they occur

Victoria’s Royal Jubilee Hospital took in two COVID-19 patients from Northern Health as part of a provincial agreement. (Black Press Media file photo)
Victoria hospital takes in two COVID-19 patients from Northern Health

Royal Jubilee Hospital takes patients as part of provincial transport network

(AP Photo/Paula Bronstein)
POLL: Has COVID-19 changed your plans for the holidays?

The lights are going up, the stacks of presents under the tree… Continue reading

Anyone with information on any of these individuals is asked to call 1-800-222-TIPS (8477) or visit the website victoriacrimestoppers.ca for more information.
Greater Victoria Crime Stoppers wanted list for the week of Dec. 1

Greater Victoria Crime Stoppers is seeking the public’s help in locating the… Continue reading

Provincial health officer Dr. Bonnie Henry updates B.C.’s coronavirus situation at the legislature, Nov. 30, 2020. (B.C. government)
Hockey team brought COVID-19 back from Alberta, B.C. doctor says

Dr. Bonnie Henry pleads for out-of-province travel to stop

B.C. Premier John Horgan on a conference call with religious leaders from his B.C. legislature office, Nov. 18, 2020, informing them in-person church services are off until further notice. (B.C. government)
B.C. tourism relief coming soon, Premier John Horgan says

Industry leaders to report on their urgent needs next week

(Needpix.com)
Fraudsters projected to use pet scams to gouge over $3M from customers: BBB

The pandemic heavily contributed to the number of puppy scams

Natalie MacMaster and Donnell Leahy are inviting audiences into their home for ‘A Celtic Family Christmas’. (Submitted)
Natalie MacMaster coming to you through Cowichan Performing Arts Centre

Here’s your chance to enjoy the famed fiddler in an online show with her husband Donnell Leahy.

An RCMP cruiser looks on as a military search and rescue helicopter winds down near Bridesville, B.C. Tuesday, Dec. 1. Photo courtesy of RCMP Cpl. Jesse O’Donaghey
B.C. Mountie, suspect airlifted by Canadian Armed Forces from ravine after foot chase

Military aircraft were dispatched from Comox, B.C., say RCMP

An 18-year old male southern resident killer whale, J34, is stranded near Sechelt in 2016. A postmortem examination suggests he died from trauma consistent with a vessel strike. (Photo supplied by Paul Cottrell, Fisheries and Oceans Canada)
“We can do better” — humans the leading cause of orca deaths: study

B.C. research reveals multitude of human and environmental threats affecting killer whales

Most Read