Given that it has the clout to force companies to comply, this looks like a promising start
Sarah Breeden, head of international bank supervision at the Bank of England. Photograph: Sarah Lee/The Guardian
Extinction Rebellionprotesters that blocked London traffic? No, a senior Bank of England official telling banks and insurers that from now on they will be expected to make global warming central to the way they operate.e can already hear the distant thunder of climate change and must not wait for the storm to hit. The
Threadneedle Street would never publicly endorse action that causes disruption but the speech by Sarah Breeden, head of international banks supervision, suggests a degree of sympathy with the points being made by the protesters: that time is running out to prevent catastrophic climate change and previous efforts to combat the problem have been nowhere near vigorous enough.
Breeden’s message to the financial sector was that they need to incorporate climate change into their corporate governance, their risk management analysis, their forward planning and their disclosure policies or face the prospect of losing a heck of a lot of money.
The financial markets have a term for a sudden drop in assets prices known as a Minsky moment (after the economist Hyman Minsky). Breeden said a climate Minsky moment was possible, in which losses could be as high as $20tn (£15.3tn).
As one of the world’s leading financial centres, it is unsurprising that the Bank’s Prudential Regulatory Authority (PRA) has taken the lead in setting out what it expects from the banks and insurance companies it supervises.
There will be those who will wonder – quite reasonably – why the Bank is merely saying it expects firms to act in ways that show they are taking climate change more seriously rather than forcing them to do so. But when the PRA says that firms are expected to act, what it really means is that they have no choice but to do so – and they have until October to do so. That’s entirely appropriate and not before time.
Chickens coming home to roost
The period 1995 to 2007 was a time of Labour party political hegemony during which it won three general elections, two by a landslide. It was also a period in which there was rapid house price inflation, especially in the southern part of the country. In London, prices rose more than threefold.
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Yet, by allowing the property market to boom out of control, Labour was storing up problems for itself. A paper by Marta Schoch, to be presented at the Royal Economic Society’s annual conference, finds that rising house prices boost support for the Conservatives. Schoch’s research found that a 10% jump in house prices increased the probability of homeowners voting Tory by two percentage points. The research found, however, that the drift towards the Conservatives was not accompanied by a decrease in support for state ownership of public services.
But that was then. If a runaway property boom prices young people out of the market, leading to a fall in owner-occupation, you would expect support for Labour to go up, especially in areas, such as London, where renting is common. Which is exactly what happened in 2017.