01.06.20 - The suits and ties at the world’s leading central banks (save one…) are increasingly pondering their role in dealing with the risks wrought by a rapidly changing climate. As The Economist put it, some see this move by central bankers as mission-critical, while some see it as mission creep. Independent of the politics surrounding the issue (i.e. whether the climate is changing because of homo sapiens), it is clear that adverse events stemming from climate change are increasing. The result, as the Bank of England’s Mark Carney has described, is increased systemic financial risk (due to increasing insurance payouts) and regulatory risk (due to looming carbon pricing and climate-related litigation against corporations). There is even a Network for Greening the Financial System, comprised of 51 central banks around the world, who are mulling over whether, and how, to price climate risk into financing operations. Notably, the People’s Bank of China (PBOC) has been a major player in setting up this organization, dedicated to the proposition that all bonds are not created equal (e.g. green bonds), while the Federal Reserve remains on the sidelines. As the world grows increasingly conscious of climate change, the US remains aloof from the vanguard of leadership, even as China strives to fill the breach.
