June 16, 2019

Climate Change Poses Major Risks to Financial Markets, Regulator Warns

Climate Change Poses Major Risks to Financial Markets, Regulator Warns


A White House spokesman, Judd Deere, did not respond to emailed questions about Mr. Behnam’s plans.

Mr. Behnam is not the first financial regulator to call attention to the market risks posed by climate change.

In 2010, the Securities and Exchange Commission began requiring publicly traded companies to disclose the risks to their bottom lines associated with climate change. Coca-Cola, for instance, has noted in its financial disclosures that water shortages driven by climate change pose a risk to its production chains and profitability, and several insurance companies have put out reports noting the risk to the industry from more frequent extreme weather.

In January, the California electricity provider Pacific Gas and Electric declared bankruptcy while facing billions of dollars in liability costs related to damages from two years of wildfires. Experts said that could be an early indicator of a wider economic toll from climate change, which is making wildfires more frequent and destructive. The same month, the Bank of England said it intended to include climate change in its “doomsday scenario” stress tests, which the bank runs to ensure it has enough capital to withstand major financial shocks.

In April, the financial firm BlackRock, the world’s largest manager of financial assets, found that investors in electric utility stocks were quick to sell following extreme weather, setting up a pattern of market volatility.

A coalition of 39 central banks, representing about half the global economy and including the central banks of England, China, Canada Japan and the European Union (but not the United States), has convened a working group to study to study the effects of climate change on financial markets.

“We understand that climate change causes a big systemic risk,” said Stefano Giglio, a professor of finance at Yale University who has published studies with the National Bureau of Economic Research on the financial consequences of warming. “But right now, we don’t have enough information, and we don’t have the right financial products to insure this risk. The CFTC can help give that information and help lay out a global marker for what we need to do.”

Mr. Trump has made it a signature priority to roll back climate change policies. He has announced that he intends to withdraw the United States from the Paris accord, an agreement among the nations to jointly address climate change, and he has set in motion legal efforts to weaken or undo major Obama-era regulations on planet-warming pollution from power plants and vehicle tailpipes.



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