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

An aerial shot of Cedar Valley Lodge this past August, LNG Canada’s newest accommodation for workers. This is where several employees are isolating after a COVID-19 outbreak was declared on Nov. 19. (Photo courtesy of LNG Canada)
52 positive COVID-19 cases now associated with LNG Canada site outbreak

Eight cases still active, 44 considered recovered

The Kitimat River in July. (Clare Rayment photo)
Good News, Kitimat!

Bringing some local good news to your week

Skeena MLA Ellis Ross has been named critic for Environment and Climate Change Strategy for the BC Liberals. (Peter Versteege photo)
Skeena MLA Ellis Ross named critic for Environment and Climate Change Strategy

Previously, Ross was the critic for LNG, Resource Opportunities, and Responsible Development

Red sky in morning: an early-morning sunrise on May 16, 2020, captured just north of Kitimat. (Eric Roy photo)
Clare’s Corner: Hello, darkness, my old friend

Why does the after-work darkness affect you so much more as an adult than as a child?

A tongue-in-cheek message about wearing a face mask to curb the spread of COVID-19 on a sign outside a church near Royal Columbia Hospital, in New Westminster, B.C., on Sunday, Nov. 29, 2020. THE CANADIAN PRESS/Darryl Dyck
B.C.’s COVID-19 infection count climbs back up to 656

20 more people in hospital, active cases still rising

THE CANADIAN PRESS/Nathan Denette
B.C. researchers launch study to test kids, young adults for COVID-19 antibodies

Kids and youth can often be asymptomatic carriers of the novel coronavirus

A sign is seen this past summer outside the Yunesit’in Government office west of Williams Lake reminding visitors and members to stay safe amid the COVID-19 pandemic. (Rebecca Dyok photo)
B.C. First Nation leaders await privacy commissioner decision on COVID-19 information

Release of life-saving data cannot wait, says coalition of First Nations

MLA Jennifer Whiteside is B.C.’s new minister of education. She is speaking out against Chilliwack school trustee Barry Neufeld and asking him to resign. (Black Press)
New education minister calls on Chilliwack trustee to resign

Whiteside echoes former minister’s promise to look at options to remove Barry Neufeld

Peter Beckett. ~ File photo
Supreme Court of Canada to decide if it will hear appeal in 2010 wife murder trial

Peter Beckett has stood trial twice for murder in connection with the death of his wife, Laura Letts-Beckett

Tabor Home in Abbotsford. (Ben Lypka/Abbotsford News)
B.C.’s largest COVID-19 care-home outbreak records 19 deaths, 147 cases

Tabor Home in Abbotsford has been battling outbreak since Nov. 4

Ash and Lisa Van carry a freshly cut Christmas tree while wearing personal protective masks at a Christmas Tree Farm in Egbert, Ontario, Sunday, Nov. 29, 2020 THE CANADIAN PRESS/ Cole Burston
‘Everyone wants a tree and they want it now’: Christmas tree sales on pace for record

Anticipated demand for Christmas trees has sparked a rush by some to purchase more trees wholesale

Business groups have been advocating for years that local approvals for construction in B.C. are too long and restricted, and that B.C.’s outdates sales tax deter business investment. (Black Press Media file photo)
B.C. residents worried about COVID-19 deficit, business survey finds

Respondents support faster local approvals, value added tax

Most Read