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.

Just Posted

An apartment building and townhouse project has been proposed at 2236 McCallum Rd. in Abbotsford. The development was given third reading by city council on June 14. (City of Abbotsford)
Apartment-and-townhouse project planned on McCallum Road in Abbotsford

Development across from old hospital site consists of 174 suites and 10 townhouses

Adam Hobbs went missing from a Langley work site on Monday, June 14 and may have gone to Vancouver. (Special to the Langley Advance Times)
Family, RCMP seek Abbotsford man missing from Langley job site

Adam Hobbs lives in Abbotsford and is a minor hockey referee

Police were on scene Monday afternoon (June 14) in the area of George Ferguson Way and Ware Street. (John Morrow/Abbotsford News)
Police called out after reports of possible home invasion in Abbotsford

Incident on Monday afternoon at George Ferugson Way and Ware Street

Migrating sockeye in the Fraser River August 7, 2007. (Fisheries and Oceans Canada)
First Nations, commercial, and recreational harvesters join forces to save Fraser River fish

‘We have to work together to rebuild these stocks while there is still time,’ says delegate

The Vancouver Canucks have polled season ticket holders on team name options for the new Abbotsford AHL team.
Vancouver Canucks poll season tickets holders on Abbotsford AHL team name

List asks fans to rank three out of 10 options, also if Abbotsford or Fraser Valley should be used

The border crossing on Highway 11 in Abbotsford heading south (file)
VIDEO: Western premiers call for clarity, timelines on international travel, reopening rules

Trudeau has called Thursday meeting, premiers say they expect to leave that meeting with a plan

Tuesday’s Lotto Max draw went unclaimed. (Photo courtesy of BCLC)
Tuesday’s Lotto Max draw went unclaimed. (Photo courtesy of BCLC)
Lotto Max jackpot goes unclaimed again

42 of the 64 Maxmillion prizes of $1 million were won, the majority were sold in Ontario

FILE - This July 6, 2017 file photo shows prescription drugs in a glass flask at the state crime lab in Taylorsville, Utah. (AP Photo/Rick Bowmer, File)
Contaminants in generic drugs may cause long-term harm to DNA: B.C. researcher

Scientist says findings suggest high volume overseas facilities require strict regulation

Restaurant patrons enjoy the weather on a patio in Vancouver, B.C., on April 5, 2021. THE CANADIAN PRESS/Jonathan Hayward
Labour shortages, closed borders major obstacles to B.C. restaurant, tourism restarts

Industry expert says it won’t start to recover until international travellers can visit

(Black Press Media file)
Dirty money: Canadian currency the most germ-filled in the world, survey suggests

Canadian plastic currency was found to contain 209 bacterial cultures

(pixabay file shot)
B.C. ombudsperson labels youth confinement in jail ‘unsafe,’ calls for changes

Review states a maximum of 22 hours for youth, aged 12 from to 17, to be placed in solitary

Eleonore Alamillo-Laberge, 6, reads a book in Ottawa on Monday, June 12, 2017. THE CANADIAN PRESS/Sean Kilpatrick
Parents will need to fight ‘COVID learning slump’ over summer: B.C. literacy experts

Parents who play an active role in educating their children this summer can reverse the slump by nearly 80%, says Janet Mort

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Most Read