Banks and insurers in the United Kingdom are critically horrified by the huge financial risks that climate change brings.
With environment and economy being interrelated, the inevitable catastrophic occurrences pose economic losses, not only in one nation but also in the global arena, if things continue to get worse. On the other hand, economic activities like burning gas and producing factory waste impend the life of mother nature.
Thus, the Bank of England (BOE) has initiated a program that would measure the impact of climate change and help find solutions to manage it.
All banks and insurance groups in the UK will undergo the dubbed stiffest climate stress tests alongside the existing financial stress tests.
BOE said that the new tests will require large lenders and insurers to go through their balance sheets of all assets to identify the risks and threats that can arise from climate change.
The lenders that currently undertake these tests include HSBC, Barclays, and Lloyds Banking Group while a number of insurers have also agreed for confidential climate-related tests. The results of all tests for both categories will then be published in 2021 and 2022.
Eventually, this will enable the fiscal clusters to hold more capital and do further business that would lead to real economic success.
As the UK’s central bank, BOE remains true to its mandate of delivering monetary and financial stability by ensuring that financial institutions, independent banks, and insurance corporations remain operational.