Carney mentions three channels for climate change to affect financial stability.
- Physical risks, or impacts today on insurance liabilities, and value of financial assets.
- Liability risks, or risks that could arise tomorrow, should those harmed by the effects of climate change seek compensation from those responsibility.
- Transition risks, such as “jump to distress pricing”, due to the need to rapidly change to a new energy system, or a transition to adapt to the consequences of a +2 degree C world.
I also like his quote, that “Your genius has been to recognize that past is not prologue, and that the catastrophic norms of the future can be seen in the tail risks of today.”