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.

Just Posted

Rockets’ winning streak goes cold with loss to Ice

Kelowna lost 3-1 to the Winnipeg Ice Wednesday, conclude road-trip this weekend

District of Lake Country proposes 6.03 per cent tax hike for 2020

Lake Country residents may be in for a significant tax increase for… Continue reading

Okanagan Water Board opens floodgates with call for grant applications

Water Conservation and Quality Improvement program open from Armstrong to Osoyoos

Kelowna Owls juniors hold onto No. 1 ranking in province

The junior girls basketball team finished 1st place at the Victoria Christmas Tournament

New juicery set to grow in Kelowna

Local Pressery will launch Dec. 22

B.C. plane crash victim identified; witnesses describe ‘explosion’

He was a flight instructor, charter pilot and owned an airstrip before leaving Alberta

More rowers come forward with complaints about coach, criticism of UVic

Barney Williams is accused of verbal abuse and harassment

Raptors fans show Kawhi the love in his return to Toronto

Leonard receives championship ring, leads new club to win

Process to identify those killed in Gabriola plane crash could take days

Canadian flight museum suggests Alex Bahlsen of Mill Bay died in Tuesday’s crash

Disturbing find: Shuswap family seeking Christmas tree locates several animal carcasses

Black bear, a coyote and five deer found dumped in gravel pit west of Salmon Arm

RCMP uncover meth in arrest of Sicamous woman linked to alleged pellet gun shooting

Police say methamphetamine and other drugs found in car driven by suspect

Pawsative Pups: Help your dog love their crate

Lisa Davies is a new columnist for Black Press who writes about dog training

Spark Joy: The art of giving and receiving

Barb and Wendy at Simply Spark Joy help you to create a clutter free home on the Black Press Media

Coldstream surf shop welcomes winter with paddle

Winter Chill event Saturday, Dec. 21, on Kal Lake is ‘food’-raiser for food bank

Most Read