Martin Arnold and Lee Harris in the FT:
The world’s financial stability watchdog has warned that disasters caused by climate change are increasingly likely to trigger broader panic in financial markets.
The world breached 1.5C of warming above preindustrial levels for the first time last year, raising the prospect of more environmental disasters.
The Financial Stability Board said the financial damage of climate shocks such as floods, droughts, fires or storms could cause a broader pullback in lending and downturn in investor confidence.
“Banks could reduce lending, including for recovery to already vulnerable households and corporates,” the body, which brings together the world’s central bankers, ministers and regulators, said. “There could also be an abrupt, broad-based repricing of climate-physical risk, as the expectation of larger future losses are incorporated into current prices and impact sectors and jurisdictions not currently directly affected by disasters.”
The report comes amid broader concerns about the capacity of the insurance sector to cover losses associated with climate change following devastating fires in Los Angeles that are estimated to have caused tens of billions of dollars’ worth of damages.
More here.
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