Banking on climatic changes
The strangest thing about Mark Carney’s comments yesterday on the perils of climate change were not the words themselves, but rather the media reaction to them.
There seems to have been a marked realisation that – if the Governor of the Bank of England is fearful of the impact of climate change – it must be ‘really serious’. I don’t know if my reading of the media reaction is wrong – but it’s interesting that Mr Carney’s warning is reported in today’s Financial Times but there is no reference to it in the London Metro.
The fact that Mark Carney has spoken about climate change seems to have made the issue of environmental sustainability an important one in the City. Yet while his words should be warmly welcomed, they are not exactly newsworthy in themselves.
According to the US National Intelligence Council's Global Trends 2030 report (published two years ago), there is little doubt that environmental impacts pose a security threat: according to its research, demand for food, water, and energy will grow by approximately 35, 40 and 50% respectively in the next 17 years.
And in 2013, the Carbon Trust conducted an in-depth study into resource efficiency in Brazil, China, Korea, UK and the USA, concluding that business was ‘sleepwalking into a resource crunch’. More than half of businesses surveyed thought the cost of products and services would rise in a resource-constricted world, with nearly a third expressing concerns about their ability to maintain quality.
Yet 43% of respondents did not monitor the risks to their business of environment-related shocks; 52% had set no targets to manage the reduction of carbon, water or waste; and only 13% of directors were remunerated based on sustainability metrics.
Thus where Mark Carney’s words are important are reinforcing the connection between climate change and the future stability of the world economy (if not the world itself), and urging immediate action. In his words: “Once climate change becomes a defining issue for financial stability, it may already be too late.”
This is much more than simply berating the attitude of fossil fuel companies, who may be seen by many as a major contributor to global warning. Instead, Mr Carney has laid down a challenge not just to ‘big business’ but also to SMEs and consumers, to take climate change seriously if the world is to have a sustainable economic future.
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