Equity markets have generally ignored the increasing number of natural disasters over the past 50 years and tougher rules are needed to make investors aware of the dangers posed by the climate crisis, the International Monetary Fund has said. Companies should be forced to disclose their exposure to climate risk because a voluntary approach does not go far enough, the IMF said in a chapter from its latest global financial stability report (GFSR). The Task Force on Climate Related Financial Disclosures, an initiative led by Mark Carney, the former Bank of England governor, outlines how companies should calculate and disclose their exposure to climate risk to investors.
The IMF functions as the global lender of last resort, bailing out countries in financial difficulty and issuing policy advice alongside its interventions. Its latest statement on the climate crisis expressed concerns that stock markets were ignoring the rise in global temperatures and its consequences. Although stock markets fell sharply in the early stages of the Covid-19 pandemic, this followed their best year since 2009 and the immediate aftermath of the financial crisis. A global index of share prices rose by 24%, and the FTSE 100 climbed by 12% despite uncertainty over Brexit.
“Climate change induced by this level of warming is, in turn, expected to adversely impact the world’s stock of natural assets, lead to a significant rise in sea level, and increase the frequency and severity of extreme weather event,” the IMF said. “As the frequency and severity of climatic hazards rise, the resultant socioeconomic losses could be significantly higher than in recent history.” Even so, according to the GFSR there had been little indication that investors had become more aware of the potential losses they could face if global temperatures continued to rise, with only a modest impact on stock markets, shares in banks and insurance companies from large disasters.
Source: Guardian
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