Climate change may hit global stock markets

Climate change might make the world's stock markets and banks unstable and lead to a financial crash, said Mark Carney, the head of the G20 countries' Financial Stability Board.

He particularly warned about the effects on the market in case of panic selling and a plunge in value of shares in fossil fuel companies and industries that produce a lot of carbon dioxide.

He said an orderly switch from fossil fuels to renewables was needed to avoid turmoil on world stock markets, according to a Climate News Network report received from London yesterday.

These companies, some of the world's largest, control one-third of stock market assets, said Carney, also governor of the Bank of England.

If investors realise these stocks are overvalued and try to sell them all at once, it will cause chaos, he said.

The Group of Twenty or Group 20 is an international forum for the governments and central bank governors from 20 major economies of the world.

The stark warning is a "remarkable intervention" from one of the world's most conservative and influential bankers, who says he will be advising the world's richest nations at the G20 summit in November to put policies in place to prevent climate change causing future severe turmoil in the markets.

UNPAID LOANS

He warned that banks might become unstable because the billions of dollars in loans they have made to fossil fuel companies might not be repaid.

Carney suggests that there will be a switch of investments from carbon-intensive industries to renewables.

However, his warning contradicts to the policies of George Osborne, UK's chancellor of the exchequer, who has this year been demolishing the UK's on-shore wind and solar subsidy programme, while providing tax breaks to North Sea oil companies to find more reserves and giving the go-ahead for fracking gas over large areas of England.

Carney did not comment on this policy rift.

Carney told the BBC, "The point is the risks build with time, and they build more rapidly with inaction, so climate change is a function of cumulative emissions, so the slower the action is today, the bigger the action has to be in the future.

"That would mean more abrupt change, that would mean bigger shocks to the value of financial assets, bigger strains on banks and insurance companies that are exposed to those assets."

ZERO EMISSIONS

He called for the setting up of a Climate Disclosure Task Force so that all companies would have to declare how much carbon they emitted or produced, and how they were going to proceed to zero emissions in the future. Since the G20 countries are responsible for 85 percent of emissions, they will be a good starting point, he said.

"While there is still time to act, the window of opportunity is finite and shrinking."

Jeremy Leggett, founder of Solarcentury, the largest UK solar electricity company, and chairman of the Carbon Tracker think tank, described it as "a momentous announcement when such an eminent banker tells the world that climate change is the biggest issue of the future".