The Bank of England is one of the few central banks to have conducted climate stress tests, alongside the European Central Bank and Banque de France.
The numbers emerged from the Bank’s first climate stress tests on seven of the UK’s largest lenders. These involved three climate scenarios over a 30-year period, covering physical and transition risks, including one in which governments fail to take further steps to curb greenhouse gas emissions, resulting in average temperature rises of 3.3 C, and a 3.9-metre rise in sea levels.
The Bank of England has warned that UK banks and insurers will end up shouldering nearly £340 bn worth of climate-related losses by 2050, unless action is taken to curb rising temperatures and sea levels.
The regulator has found that without early action, companies would suffer a surge in loan and mortgage defaults, investment losses, and climate-related lawsuits – particularly for insurers – worth £334 bn across the UK’s 19 largest banks and insurers by 2050.
While the regulator has been praised for the climate stress tests, the Bank of England has come under fire for so far refusing to publish data for individual firms, and stopping short of introducing immediate capital requirements, which would make it more expensive to offer loans and services to fossil fuel companies and carbon-intensive projects.
