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

Tanvi Pandhi, a Grade 12 student at Fleetwood Park Secondary, took part in the Surrey school district’s survey of students in grades 10 to 12, with a focus on health and safety during the COVID-19 pandemic. (Photo: Lauren Collins)
Surrey students voice concerns about mask wearing, distancing in schools

Surrey school district has been surveying students in grades 10 to 12

Cambridge Elementary School music teacher Darlene Lourenco is “on the mend” after contracting COVID-19. She had a two-week stay at Surrey Memorial Hospital, including in the ICU. (Photo: submitted)
Surrey music teacher at home after two-week hospital stay battling COVID-19

Meantime, Surrey Teachers’ Association sends letter with safety demands to board of education

Fraser Health has declared a COVID-19 outbreak at Newton Elementary School in Surrey, according to an information bulletin Friday, Nov. 27, 2020. (Image: Google Street View)
COVID-19 outbreak declared at second Surrey elementary school

Newton Elementary closed for two weeks, set to reopen Dec. 14

Keir Macdonald, CEO of Phoenix Drug and Alcohol Recovery Education Society, with the “first of its kind” Adult Residential Substance Use and Supportive Recovery Facility Homelessness Count. It was done around the time of the Metro Vancouver Homeless Count (March 3 to 4, 2020) to complement the count. (Photo: Amy Reid)
Surrey homeless, recovery counts show need for long-term solutions

This was the first time recovery, substance use facilities were included in the count

Joy Johnson, seen here during an installation ceremony on Oct. 22, is Simon Fraser University’s 10th president and vice-chancellor. (Submitted photo)
SFU’s Surrey campus tackling COVID-19-related research

‘We can learn now,’ SFU president Joy Johnson said, ‘so should something like this happen again we’ll be prepared. We have to learn from this current pandemic’

Mary Cox and Jack Plant dance in their pyjamas and slippers at the morning pyjama dance during the Rhythm Reelers’ 25 Annual Rally in the Valley Square Dance Festival in Chilliwack on June 4, 2011. Sunday, Nov. 29, 2020 is Square Dancing Day. (Jenna Hauck/ Chilliwack Progress file)
Unofficial holidays: Here’s what people are celebrating for the week of Nov. 29 to Dec. 5

Square Dancing Day, Disability Day and International Ninja Day are all coming up this week

Black Press Media and BraveFace have come together to support children facing life-threatening conditions. Net proceeds from these washable, reusable, three-layer masks go to Make-A-Wish Foundation BC & Yukon.
Put on a BraveFace: Help make children’s wishes come true

Black Press Media, BraveFace host mask fundraiser for Make-A-Wish Foundation

Kevin Bieksa during his days playing with the Vancouver Canucks. (Photo: commons.wikimedia.org)
Bieksa to guest on free Canucks Alumni ‘Hot Stove’ on Zoom app

Former NHL player has become a game analyst on Sportsnet

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

114 Canadians were appointed Nov. 27 to the Order of Canada. (Governor General of Canada photo)
Indigenous actor, author, elder, leaders appointed to Order of Canada

Outstanding achievement, community dedication and service recognized

Screenshot of Pastor James Butler giving a sermon at Free Grace Baptist Church in Chilliwack on Nov. 22, 2020. The church has decided to continue in-person services despite a public health order banning worship services that was issued on Nov. 19, 2020. (YouTube)
2 Lower Mainland churches continue in-person services despite public health orders

Pastors say faith groups are unfairly targeted and that charter rights protect their decisions

A big job: Former forests minister Doug Donaldson stands before a 500-year-old Douglas fir in Saanich to announce preservation of some of B.C.’s oldest trees, July 2019. (B.C. government)
B.C. returning to ‘stand-alone’ forests, rural development ministry

Horgan says Gordon Campbell’s super-ministry doesn’t work

Peter Wilson, left, and Micah Rankin, right, formed the Special Prosecutor team that was tasked with reviewing and litigating charges stemming from the Bountiful investigation. Trevor Crawley photo.
End of Bountiful prosecution wraps up decades of legal battles

Constitutional questions had to be settled before a polygamy prosecution could move forward

Alexandre Bissonnette, who pleaded guilty to a mass shooting at a Quebec City mosque, arrives at the courthouse in Quebec City on February 21, 2017. THE CANADIAN PRESS/Mathieu Belanger - POOL
Court strikes down consecutive life sentences; mosque shooter has prison term cut

The decision was appealed by both the defence and the Crown

Most Read