Climate change could cause the next financial crash

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According to former Bank of England executive Mark Fisher, climate change “could trigger the next financial crash” due to a sudden repricing of assets.

Fisher pointed to the recent fall in sterling following the government’s timetable for leaving the European Union as “exactly the sort of event you might get with climate change.”

Governments are taking climate change increasingly seriously meaning that businesses should be prepared for regulation changes to follow, warned the 26-year-veteran of the UK’s central bank.

Fisher raised the possibility of unexpected moves in financial markets as a result of climate change with the chance of a “system-wide repricing of assets happening quite suddenly.”

Fisher is not alone in the financial community with his view of climate change as a potential “systemic risk”. An investment manager at AustralianSuper, Australia’s largest pension fund, Andrew Gray described climate change as “a genuine investment risk” at a Citigroup Inc. conference in Sydney.

According to Gray, financial risks associated with climate change come both from the transition towards a lower carbon economy and from the cost of the impact of climate change if warnings are ignored.

The recent ratification of the Paris Agreement designed to limit global warning by members of G20 at the summit in Hangzou, China showed the governments of leading financial powers taking a stronger line towards tackling climate change.

A paper was also presented at the summit, by the Cambridge Centre for Sustainable Finance, urging financial institutions to improve the way they assess climate risks.

“You don’t need to believe in climate change, you don’t need to believe that it is man-made. You just need to believe that governments are going to do stuff and that is going to affect your business and then it is a material risk,” said Fisher.

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