Climate risks to the financial system may come from two sources
made an unusual entrance. Just before its governing council was due to meet, two paragliders landed on one of its buildings in Frankfurt, unfurling a banner reading: “Stop funding climate killers!” Another banner urged the bank to “Act on climate now!” Implicit in the stunt, timed to mark the release of a Greenpeace report on the bank’s bond-buying, was praise. Politicians might dither but central banks have the power to get things done.
Physical risks already mean losses for insurers and lenders in places like northern Australia. More will be affected. In a stress test in 2020, the Banque de France concluded that insurers in some regions, such as the Mediterranean, would face heavy losses by 2050. But the conclusion of most stress tests is that the impact of climate risk is likely to be moderate. Last year staff at the Reserve Bank of Australia reckoned that 1.
Put all this together and climate risks seem more “mission vigilant” than “mission critical”: worth studying and keeping on banks’ radar screens, but not requiring drastic action today. To that end, theis urging lenders to improve disclosure to supervisors, and demanding more information from them. By contrast, central banks in Asia have been more active. They have often played a role in developing markets and guiding credit before. Thelaunched its own green lending operation in November and has developed the market for green bonds and pressed forward an environmental labelling scheme. In December Japan extended more than ¥2trn in interest-free loans for climate-linked loans.
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