S & S In Brief: UK Begins Financial Climate Stress Testing

Sustainable development is more than ethical shopping choices, the circular economy and fighting plastic. Green finance and economic reform to encapsulate financial frameworks and key metrics that better the planet as we transition from the Holocene to the Anthropocene is crucial.

Acceptance, learning and the decimation of green finance is crucial to create an infrastructure for the next few decades to mitigate the true effects of global warming and is a key area of my interest in sustainability!

The economic cost of inaction is astounding. Did you know that…

📈Sufficient economic governmental policies globally will require investing the equivalent of 1% global annual GDP VS risk of inaction which stands at 5% global GDP each year (scope to increase to 20%) – The Stern Review

📈The loss of ecosystem services from 1997-2011 due to land use change cost approximately $4.3-20.2 trillion a year

Economist Nicholas Stern explores the economics of climate change in relation to global GDP and argues that it is the greatest market failure the world has seen as resources have been misallocated which has created a negative externality. Financially we are not paying the true cost the eco systems and natural landscapes.

So why am I mentioning this now?
Earlier this week it was announced The Bank of England will set up tough climate stress tests against UK lenders and insurers and scrutinise how they would cope in a 3 temperature rise scenario! The objective is to ensure the UK’s core financial systems are resilient to climate change. This is a big move in the right direction.

The need to know:

  • This could be extreme as scenarios of a 4C temperature rise by 2080.
  • The first results will be published in 2021, those tested include Barclays, HSBC & Lloyds Banking Group.
  • It looks at exposure for a multitude of things i.e. mortgages in flood hit areas, fossil fuel producers
  • Mark Carney will also be leaving his position to take up a diplomatic post in the United Nations where he will be special envoy for the United Nations on climate change and finance. You can read more about his appointment via the Telegraph here.

If you are interested in this topic:  

You can read my full article on Socially Responsible Investing here.

You can also read about the business case for companies to invest in a sustainability strategy here.

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