The Bank of Canada's latest financial system review report is being released today — and it's expected to be the first ever to explore the threat climate change poses to the country's financial system.
The Bank of Canada recently announced it is joining the Network for Greening the Financial System, a worldwide forum of central banks and financial system supervisors looking to better manage the financial risks of climate change.
And today, for the first time, the bank's annual financial system review (FSR) will include an analysis of the resiliency of the country's financial and monetary system, outlining the main vulnerabilities and risks facing it. This move is something critics have been wanting for quite some time, according to CBC Canada.
Climate change poses a significant financial risk to the global economy, Each country has its differences geographically, financially and resource-wise. The world is already experiencing many of the impacts of climate change, like extreme weather events, including floods and drought.
Townsville and other parts of northeastern Australia have had a year's worth of rainfall in a week causing devastating flooding Queensland Fire and Emergency Services, QUEENSLAND FIRE AND EMERGENCY SERVICES/AFP
"And so for two years, Canada has been absent from that international discussion," said Kevin Quinlan, a consultant who focuses on climate change and responsible investment. "Countries that have very different economies than Canada's are really setting the agenda ... and that's a real disadvantage for Canada."
"The importance of climate-related issues for financial stability and monetary policy (has) become increasingly clear," said Bank of Canada Governor Stephen Poloz at the time. "This is particularly true for Canada, where resources play a vital role in our economy and where the natural environment is a defining feature of our national identity."
"We're still at the very beginnings of modeling the impact of climate change on the economy ... the Bank should obviously have a leading role in that," said Céline Bak, president of Analytica Advisors and a senior associate with the International Institute for Sustainable Development.
Melissa Burke @nlmsb posted this picture of the damage to the St. Alban's bridge on Tuesday. This is a stunning photo. #nsstorm/Twitter
How will this affect Canadians?
Seeing as Canada has made a commitment to reduce greenhouse gas emissions and limit the rise of global temperatures, it is imperative the country look toward a greener economy to meet its target. This will affect corporations, businesses associated with the fossil fuel industry.
Adding climate change risk to monetary policy will impact where people place their investments and retirement portfolios, as well as the government regulatory changes that constrict companies. The thing is, even if many people continue to invest as they do now, they will have the added advantage of knowing to what degree their investments are exposed to the costs of climate change.
"Just getting the discipline within mainstream financial statements (on) what the impact of climate change is going to be on the company, and what the company's impact on climate change is, should be a minimum standard," said Bak, adding that transparency is the cornerstone of well-functioning capital markets.
The Bank of Canada Wladyslaw
Network for Greening the Financial System (NGFS)
Digital Journal has reported on the need for corporate transparency a number of times, and there is an ongoing movement to make this mandatory in all financial reporting on a global basis.
The Network for Greening the Financial System (NGFS) is a group of Central Banks and Supervisors willing, on a voluntary basis, to exchange experiences, share best practices, contribute to the development of environment and climate risk management in the financial sector.
The NGFS was launched in 2017 during the One Planet Summit in Paris, reports CNBC. Member financial institutions include 30 central banks from around the world, including the European Central Bank and the People’s Bank of China, and now, The Bank of Canada.