Mark Carney tells banks they can't ignore climate change dangers

‘If some companies and industries fail to adjust to this new world, they will fail to exist,’ says central bank governor

Mark Carney has warned banks they cannot ignore the “catastrophic” effects of climate change and must be at the heart of tackling the problem.

Along with other central bankers from around the world, he called on governments and financial institutions to take a pivotal role in keeping temperature rises “well below 2C” as pledged under the Paris climate agreement.

Mr Carney said the “enormous human and financial costs of climate change are having a devastating effect on our collective wellbeing”.

Moving to a low-carbon economy will require a “massive reallocation of capital”, he and Bank of France governor François Villeroy de Galhau wrote in an article for The Guardian.

“If some companies and industries fail to adjust to this new world, they will fail to exist.”

“The prime responsibility for climate policy will continue to sit with governments,” Mr Carney and Mr Villeroy said. “And the private sector will determine the success of the adjustment. But as financial policymakers and prudential supervisors, we cannot ignore the obvious risks before our eyes.”

A group of 34 central banks and supervisors representing half of global greenhouse gas emissions are to release their first report on Wednesday under the banner of the Network for Greening the Financial System (NGFS).

The report is to make four key recommendations aimed at turning commitments on greenhouse gases into actions.

It will say that central banks should make monitoring of climate-related financial risks central to their day-to-day work. The group also tells central banks to make sure their own balance sheets are environmentally sustainable, make public any data they have on climate-related risks and support collaboration to develop solutions.

The existential threat of climate change has again been highlighted this week as thousands of people blocked roads and bridges across London, bringing widespread disruption to the capital.

Protests were part of a global campaign organised by UK group Extinction Rebellion, which has planned demonstrations in 80 cities and 33 countries.

The UK’s biggest investor this week said it would apply further pressure on companies that it believes are not doing enough to curb climate change.

Legal and General Investment Management (LGIM), which invests more than £1 trillion of pension funds and other savings, pulled millions of pounds last year from eight companies including Russian oil giant Rosneft, Subaru and the China Construction Bank.

LGIM also said it would continue to vote against companies boards if they do not meet certain standards on the environment, gender diversity and other governance issues.

Charlie Kronick, Greenpeace UK’s oil finance advisor, said LGIM’s stance on climate change was “absolutely a positive step”.

He added: “Asset managers need to go beyond voting against the appointment of board members who refuse to act on the climate emergency they face, and vote against pay packages that reward executives for failing to align with a 1.5 degree future, and against the appointment of auditors that don’t fully and accurately disclose the risks that the company faces from climate change.

“Investors need to disclose how they vote on resolutions at highly polluting companies, as well as the rationale for voting on climate resolutions at any listed company. This isn’t ‘virtue signalling’, it’s good business.”