Bank of Canada governor Stephen Poloz says the institution is developing new models to try and understand the significant consequences climate change could have on financial stability.
In a discussion about emerging risks in Toronto, Poloz was not asked about climate change by the moderator or the audience but took it upon himself to raise concerns about transition risks as calls for action on climate change increase.
Poloz was speaking to members of the Ontario Securities Commission Thursday.
His comments come the same week the Bank of Canada outlined its research priorities on the potential impacts of climate change, including physical risks of intensifying weather, the financial risks of stranded assets, and wider risks to the system of increased volatility and unpredictability.
The report by Miguel Molico, senior research director at the bank’s Financial Stability Department, notes that carbon-intensive sectors like oil and gas could be negatively affected by significant changes in pricing in a transition away from a carbon economy.
Molico says the bank is working to better understand the financial implications of climate change, including a climate stress-testing framework to assess the resilience of the financial system to hypothetical extreme but plausible scenarios.
In May, the Bank of Canada for the first time listed climate change among the top worries for the economy as part of its financial system health report.