The Bank of England has confirmed it will not be mandating that the big UK banks release data on what they are doing to counter any perceived risks from the growing threat of climate change. Meanwhile campaign pressure grows for the government and institutions to announce they are taking action.
However, the central bank did go as far as calling banks to “consider the relevance” of disclosing some details, as politicians and business leaders come to terms with a stark warning from the Intergovernmental Panel on Climate Change (IPCC) last week, which said time was running out to avoid serious long-lasting changes to the planet.
This was echoed by the Prudential Regulation Authority (PRA), who have just released guidelines for consultation today, in the hopes they can gently persuade banks to think about how they can address problems posed by climate change. The PRU are also looking into how they might encourage the big financial lenders to help the country move towards a more low-carbon economy.
Noting previously that not enough of the big banks have accurately considered the risks involved to the economy by failing to take this seriously, Carney has warned of a “catastrophic impact” if more is not done in the very near future. With only 10% of the banks having looked into what future they might have under a changing planet, it suggests there is a lot of work to do to elicit major progress.
The IPCC said last week that unless global warming is capped at 1.5C compared to pre-industrial levels, sweeping environmental changes will occur, and it will lead to a range of issues from crop failures and extreme weather events, to economic collapses as the landscape changes. There is therefore an undercurrent of governments starting to take more notice following their landmark report.
Although it would appear the Bank of England has yet to believe it must mandate these changes, it has already provided advice on what steps should be taken to begin with, including appointing a senior manager within each business to lead on allocating financial risks and understanding what they will do to mitigate them.
The bank said “board-level engagement” was a must if they were to do anything meaningful, and said it was necessary to find out if there was a case to feel that current risk management strategies may not be strong enough.
With both banks and insurers under heavy threat by a volatile financial market shaken up by climate change risks, it is important for each business to figure out how their bottom line will be effected, and what planning needs to be put in place.
In a statement, the PRA said they will “embed these expectations into its existing supervisory framework and experts firms’ responses to be proportionate to the nature, scale and complexity of their respective businesses.”
While these moves have been welcomed as a start, it is argued by many that this is not enough, as one green banking expert labeled it as something that does not “really measure up to the scale of the challenge”.
With some organizations and industry bodies already calling for risks to be made public, there is a growing appetite for big banks to make clear how they plan to account for climate change, but as of yet the picture is still unclear.