As the Deputy Governor for Prudential regulation mentioned in one of his recent interviews, climate change is expected to hurt the UK in the coming years economically. Unless any appropriate measures are taken, there will be losses.
Climate Change Will Cost The UK Billions
Without the proper steps taken by the government, it is expected that the rising sea level in the coastal towns and the increasing temperature will cause a massive loss to many banks.
It is also expected that as the climate continues to change, it will also affect the agricultural sector of the UK. Thus there will be more climate-related lawsuits which can lead to public unrest.
As per recent financial reports of nearly seven significant banks in the UK, it is evident that there will be a net loss of about 340 billion euros.
What Does The Report State?
According to the climate stress reports, the main reason behind this situation is the previous thirty years of constantly changing climate and increasing carbon emissions.
The government has repeatedly not taken appropriate measures to curb the emissions and transition to renewable sources in the last decades.
As a result, the current sea level rising rate is standing at nearly 3.9 meters along with a rise of 0.3 degrees celsius temperate in the last thirty years.
The regulators also have warned that without immediate and severe action taken by the government, these numbers will rise rapidly in the upcoming years.
It is expected that along with the rising climate, the rate of degradation of agriculturally active lands will also increase. It is going to hamper the food supply across the country severely.
Effects Of Climate On Economic Institutions
As per the financial reports, regulators found that without any early actions regarding climate change, there will be a spike in mortgage loan defaulting and funding loss to many central banks.
In total, about seventeen banks are expected to suffer highly due to climate change which is expected to cause a loss of about 334 billion euros by the middle of this century.
As per the chief government officer of Prudential Regulations, Sam woods, there will be a significant loss of capital and severe effect on the economy even if the implementation of immediate government actions regarding climate change occurs. But, the effect is expected to be much smaller if proper action is taken.
How Will The Bank Of London Be Affected?
Many of the banks will be affected by the rapid change in climate, and increasing sea level will cause a significant difference in the policy of the Bank of England.
As per the Bank of London reports, if proper actions are not taken by 2031, there will be a loss of about 110 billion euros, including other collective losses. The loss will be twice the net loss experienced during the covid pandemic across the country.
Therefore, it is a severe matter. The government is expected to take drastic actions to reduce this financial pressure on banks and prevent huge losses to the already covid affected economy.
Currently, the Bank of England is among the few banks that have performed climate stress tests. Still, in the future, more banks are expected to do the same test to get a clear idea about the effects of climate change on the economy.
