“It is potentially a systemic risk.”
Climate change could cause the next financial crisis, the former deputy head of the Bank of England’s regulatory department said Monday.
Climate change “is potentially a systemic risk,” Paul Fisher, who recently retired as deputy head of the Prudential Regulation Authority, told Bloomberg. “It could be the trigger for the next financial crisis,” he said, noting that climate change can force a sudden change in prices in a similar way that the United Kingdom’s decision to leave the European Union damaged the sterling’s value.
Fisher, an expert on monetary policy and financial markets, explained the effects of climate change — storms, drought, and other environmental instability — can move financial markets as there is a risk of “system-wide repricing of assets happening quite suddenly.” He also said that policy changes, such as implementing a carbon tax, could have a market effect.
Some elected officials argue that environmental policies to reduce the emissions that cause climate change are too costly, and Fisher’s comments come in line with years of economic research that underscore the importance of predictable regulatory regime over market instability. Not acting on climate change could be much worse, economically.