(OTTAWA) Canadian financial institutions are potentially exposed to significant economic shocks as the global economy continues its transition to a low-carbon world, argues a new report by the Bank of Canada and the financial regulator. Canadian banks.
Posted at 1:24 p.m.
The climate policy scenarios discussed in the document do not constitute forecasts or predictions, but rather aim to illustrate the possible consequences of the climate transition for the Canadian economy as a whole.
According to the Bank of Canada and the Office of the Superintendent of Financial Institutions (OSFI), the initiative is a first attempt to better understand the long-term risks posed by climate transition and to assess the extent to which banks and other financial institutions are modeling themselves the risk.
The report highlights that Canada is more at risk of experiencing the economic impacts of the transition due to its large exposure to commodities, which will see their prices fall as climate policies strengthen globally.
The scenarios show that faster action on climate change will lead to a smoother and less risky transition. In contrast, modeling of particularly abrupt global policy shifts showed potential financial market disorder, accompanied by a 10% drop in Canada’s gross domestic product (GDP) from what it would be by 2050. in the base scenario.
The report finds that financial institutions are still in the early days of assessing the risks of climate transition and that modeling is still hampered by unequal access to data.