LONDON, Sept 29 (Reuters) – Bank of England Governor Mark Carney said on Tuesday that companies must be more open about their “climate change footprint” to avoid abrupt changes in asset prices that could destabilise markets.
The speed at which assets such as coal, oil and gas reserves are re-priced to reflect the impact of climate change is vital to reduce potentially “huge” financial risks to British insurers and other investors, he said.
“Risks to financial stability will be minimised if the transition begins early and follows a predictable path,” Carney told a Lloyd’s of London insurance market event.
The goal of limiting global temperature rises to two degrees above pre-industrial levels would render the vast majority of fossil fuel reserves “stranded” or unburnable without expensive carbon capture technology, he said.
Carney, who made no comment on UK monetary policy, also heads the Financial Stability Board (FSB), which coordinates financial regulation for the Group of 20 economies (G20).
At a meeting in London last week, the FSB agreed to consider recommending to G20 leaders in November that more should be done to develop consistent, comparable, reliable and clear disclosures by companies on the “carbon intensity” of their assets, he said.
Such disclosures would show investors how companies will manage risks from climate change.
“The right information allows sceptics and evangelists alike to back their convictions with their capital,” Carney said.
“It will reveal how the valuations of companies that produce and use fossil fuels might change over time.”
Disclosures would expose the likely cost of doing business, paying for emissions, help smooth price adjustment, and inform policymakers, Carney said.
Carbon footprint disclosures differ greatly and the FSB could help forge consistent, global standards, he said.
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