The Bank of England (BoE), which recently published the results of its first climate stress test, is calling on banks and insurers operating in the UK to act quickly to reduce their exposure to climate risk. Otherwise, they could face heavy losses. According to the first climate stress tests, the bill would be between 209 and 334 billion pounds.
Testing the responsiveness of the financial system to climate change
On October 8, 2019, Bank of England Governor Mark Carney declared that the central bank would be " the first regulator to stress test the financial system against different climate change scenarios " such as increased frequency of weather events and the transition to a carbon-neutral economy.
The " climate stress tests " launched by the BoE aim to measure the ability of British banks to weather an economic downturn without going bankrupt and without needing taxpayers' money.
Climate risk estimated at $200 billion for banks
Following its first climate resilience test, the BoE estimates that, in the event of poor climate risk management, financial players could see their annual profits slashed by 10-15%. More precisely, the bill could reach between 209 and 334 billion euros by 2050, depending on how quickly the government implements measures to move towards a low-carbon model.
Despite these alarming results, the Bank of England reports that banks and insurers are in a position to absorb the shock without any direct impact on their solvency.
Roll back greenwashing
A few days before the publication of the results of the BoE's first stress test, HSBC was called to order by the British advertising regulator. The bank allegedly ran a marketing campaign in which it presented itself as being particularly active on environmental issues, despite being heavily involved in financing activities that generate greenhouse gas emissions.
In a provisional document, the Advertising Standard Authority (ASA) denounces an advertisement in which the bank boasts of planting 2 million trees to capture 1.25 million tonnes of CO2 from the atmosphere. In another advertisement, the bank claimed it was ready to invest $1,000 billion to help its customers make the energy transition.
The UK regulator describes the ads as " misleading ", since they aim to make people believe that HSBC " makes a positive overall environmental contribution as a business " and could influence the decision of some customers looking to take out one of its products.
This is the first intervention by the UK's advertising watchdog since it decided to step up its vigilance on greenwashing in September 2021. Last year, at COP26, financial institutions made ambitious commitments to combat global warming.