The Bank of England (BoE) has published (16th June) its updated analysis of the climate change and systemic risk. According to the bank´s bulletin the central bank is focusing on the physical and transition risk sides of the climate change. This means for example that the central bank is entering more deeper co-operation with insurance companies and also reviewing climate-related risks in the UK banking sector.
The central bank is supporting the market transition to low-carbon economy with different co-operations in global and local markets. The bank is saying that a successful transition to a lower cardon future will require the engagement of wide range of actors, including central banks and financial regulatos.
According to the study, the next fifteen years will be critical while the global economy is undertaking a deep structural transformation. This would mean that around 90 trillion US dollars will be likely to be invested in infrastructure in the world´s urban, land use and energy systems until 2030. This estimate is based on Global Commission on the Economy and Climate organization.
But also the International Energy Agency (IEA) has estimated that 26 trillion US dollars of additional investments is needed in renewables and energy efficiency between 2015 and 2040 to achieve the 2* Celcius Paris climate agreeement target.
Green Finance barriers
Green Finance and Green Bonds are seen as new financial tools to help the transition to low carbon economy. According to the Bank of England, there are still some barriers to be solved in order to scale up the green finance.
One obstacle is the lack of integration of environmental impact in the investment process, which will lead to sub-optimal allocation of capital. The others include for example maturity mismatch between short-term and long-term needs, lack of clarity of green definitions, lack of relevant disclosure information of environmental issues and the level of understanding of the financial implications of environmental risks.
According to the BoE, G20 leaders and TaskForce will discuss Climate Change issues and this low-carbon transition in their meeting in Hamburg, July 7.-8. 2017.