Could climate change spark a financial crisis? Candidates warn Fed it’s a risk

(Inside Climate News, 15 Jul 2019) Some of the Democrats running for president are urging the U.S. central bank to actively confront climate risks to protect the nation's financial system.

A few of the Democrats running for president have started warning about climate change in a way that voters rarely think about yet can profoundly affect their lives. To sum it up: If you think the housing crisis was bad, wait until you see how the climate crisis plays out for financial markets.

The candidates are urging the Federal Reserve—the United States' central bank—to work with financial institutions around the world to confront climate risks that could trigger cascading collapses.

They also want regulators to ensure that America's financial system is resilient to the impacts of climate change. 

It's not just that fossil fuel projects, like other infrastructure investments, are at risk from severe weather events, a risk that lenders and insurance companies must shoulder. It's also that when the world finally weans itself away from the fossil fuels whose use is driving global warming, the business models of some of the most heavily capitalized world industries could crumble along with demand for their products.

Investors call the problem "stranded assets," and they've been warning about it for years.

The challenge for the candidates is to convert the experts' somewhat arcane and technical policy recommendations into a stump-speech sound bite or a debate-stage zinger. Candidates haven't yet been able to put the issue in such simple terms.

External link

Inside Climate News, 15 Jul 2019: Could climate change spark a financial crisis? Candidates warn Fed it’s a risk