Companies should be more open about climate change footprint, says Carney

The governor of the Bank of England, Mark Carney, said that companies across the world need to be more transparent about their “climate change footprint” to avoid financial crises.

Carney talked about how heavily exposed insurers and investors are to the effects of climate change and stressed that time is running out to deal with the problem.

He noted that since the 1980s the number of weather-related loss events had tripled.

In a speech to the insurance market Lloyd’s of London on Tuesday he said: “Risks to financial stability will be minimised if the transition begins early and follows a predictable path,”

“The challenges currently posed by climate change pale in significance compared with what might come,” Carney said. “The far-sighted amongst you are anticipating broader global impacts on property, migration and political stability, as well as food and water security. So why isn’t more being done to address it?”

Carney, who is also Chairman of the G20’s Financial Stability Board (FSB), said that the FSB agreed to consider telling G20 members in November that there needs to be a push for consistent and reliable disclosures by companies on the “carbon intensity” of their assets.

“The right information allows sceptics and evangelists alike to back their convictions with their capital,” Carney said. “It will reveal how the valuations of companies that produce and use fossil fuels might change over time.”

He added:

“Climate change is the tragedy of the horizon. We don’t need an army of actuaries to tell us that the catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors – imposing a cost on future generations that the current generation has no direct incentive to fix.

“The horizon for monetary policy extends out to two to three years. For financial stability it is a bit longer, but typically only to the outer boundaries of the credit cycle – about a decade. In other words, once climate change becomes a defining issue for financial stability, it may already be too late.”