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  5. Should Banks Be Forced to Price In Climate Change?
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Should Banks Be Forced to Price In Climate Change?

  1. Ben Bailey
    Ben Bailey
  2. Money & Economics
  3. Friday, 17 July 2020
Hi All

Recently, the financial arguments for mitigating climate change seem to have been gaining strength and momentum. For example, many investment funds are divesting from fossil fuels, renewables are now often the cheapest form of energy generations, fracking companies are going bankrupt, and EVs will soon reach price parity with legacy vehicles.

I just read this story which presents an argument for forcing banks to price climate change into their lending.

I wonder what you think of this proposal?

I also wonder if similar regulation should also be applied to other industries?
Responses (4)
Richard Burrett
Richard Burrett
Accepted Answer Pending Moderation
It is an interesting question. Some might argue that banks should price in any risk that is financially material and therefore there is no need to make specific provision for climate change. I tend to disagree as the risk radar in some organisations is not extensive enough to detect and quantify the full exposure of climate risk therefore a degree of "coercion" may be needed.
  1. more than a month ago
  2. Money & Economics
  3. # 1
Jonathan Jenny
Jonathan Jenny
Accepted Answer Pending Moderation
Good question! My two cents is that unless there is a regulation that provides a standardized degree of coercion, the first to price the full exposure will be penalized with regard to those that choose more favorable methods or delay action.
  1. more than a month ago
  2. Money & Economics
  3. # 2
James Miller
James Miller
Accepted Answer Pending Moderation
Ben Bailey, I found this report "A call for action. Climate change as a financial risk". It might be useful if you are trying to gain a deeper understanding of the issues involved.
  1. more than a month ago
  2. Money & Economics
  3. # 3
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