Wednesday, October 7, 2015

Bank of England: Liability for climate changes damage may affect financial stability

In a speech at Lloyd's, the governor of the Bank of England, Mark Carney, took the view that climate change could have a disruptive effect on the financial stability in three ways, one of them being the liability of CO2 emitting industries. See the following extract of this speech:
“There are three broad channels through which climate change can affect financial stability:

  • First, physical risks: the impacts today on insurance liabilities and the value of financial assets that arise from climate- and weather-related events, such as floods and storms that damage property or disrupt trade;
  • Second, liability risks: the impacts that could arise tomorrow if parties who have suffered loss or damage from the effects of climate change seek compensation from those they hold responsible.  Such claims could come decades in the future, but have the potential to hit carbon extractors and emitters – and, if they have liability cover, their insurers – the hardest;
  • Finally, transition risks: the financial risks which could result from the process of adjustment towards a lower-carbon economy. Changes in policy, technology and physical risks could prompt a reassessment of the value of a large range of assets as costs and opportunities become apparent.” expects that the Bank of England's awareness of the potential of climate change damage liability to become mainstream thinking sooner or later. It could be rather sooner if key players understood that CO2 polluters can be targeted in many jurisdictions at the same time. This thought is now winning ground. Recently, the president of the Environmental Organization Center for International Environmental Law (CIEL), Carroll Muffett, joint the club. Carroll pointed out that the oil and carbon industry might face lawsuits arising from any country where they do business.

The full video of the full speech can be found here:

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