Regulator motivation and aims

Sergio Scandizzo and Tony Hughes

HUMANITY VS BANK SAFETY

Throughout the debate on climate risk and bank safety, it is common for commentators to juxtapose two critical questions at the heart of the climate quandary. During former Bank of England Governor Mark Carney’s seminal speech of 2015, he spelt out the danger to humanity from the perils of climate change and the need for a concerted response by policymakers. Against this backdrop was placed the central bank mandate for financial stability and the central question of the risk that climate change poses to financial interests.

The two questions facing the financial industry are thus:

1. Can banks and insurers help or accelerate broader societal efforts to fix climate change?

2. Are banks and insurers threatened by the physical risks of climate change or by society’s efforts to transition the economy to net zero?

These two questions are very different in form and function.

The first question involves efforts to save humanity from the existential problem of global warming. If efforts to address this question are successfully prosecuted, the result will be the survival of the human species, the preservation of global biodiversity and the well-being of future generations.

The