Investors should prepare for impact of green stress tests on banks

Central bankers look at powerful tool to nudge financial system to address climate risks

 
The writer is senior adviser to the chief executive of UBS and was previously a senior adviser to former Bank of England governor Mark Carney

 
The world’s central banks are going green. At a recent “Green Swan” conference for regulators, the world’s top central bankers agreed they had a clear role to play in tackling climate change. But which measures are the most important? And how much would their actions shift the cost of capital for high and low carbon companies? I suspect that climate stress tests may prove the most powerful tool to nudge the financial system.

Over the coming year, a dozen central banks will run climate transition stress tests on banks, insurers and pension funds, following the Bank of England’s lead. They include the European Central Bank as well as authorities in Australia, Canada, Japan and Singapore. These tests could be highly catalytic in repricing the cost of capital between companies. Investors will want to get ahead of these exercises.

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Πηγή: amp.ft.com