Financial institutions ignoring research that shows economic damage of climate change
Financial institutions, central banks, regulators and governments are ignoring economic research which shows the dangers and economic damage of climate change.
Financial institutions, central banks, regulators and governments are ignoring economic research which shows the dangers and economic damage of climate change.
The economist Prof. Steve Keen, a Distinguished Research Fellow at University College of London and author of Can We Avoid Another Financial Crisis? argues that just as mainstream economists failed to predict the global financial crisis in 2008 – the worst economic crisis since the Great Depression – they could now be steering the world toward another crash.
“Global warming is not a minor cost-benefit problem that will mainly affect future generations, as the economic literature asserts, but a potentially existential threat to the economy, on a timescale that could occur within the lifespan of pensioners alive today,” he states. “We are talking about the financial futures of millions of people.”
The report exposed that many pension funds use investment models that predict global warming of 2 to 4.3°C will have only a minimal impact on member portfolios, relying on economists flawed estimates of damages from climate change, which predicts that even with 5 to 7°C of global warming economic growth will continue.
The report underscores that such economic studies cannot be reconciled with warnings from climate scientists that global warming on this scale would be “an existential threat to human civilisation.”
In 2022, scientists warned that several tipping points risk being triggered in the next decade. For example, loss of winter ice in the Barents Sea and collapse of deep convection in the Labrador Sea could lead to more extreme seasonal weather in Europe, worse than experienced during the Little Ice Age, with significant sea level rise on the northeast seaboard of the USA.
These “tipping points” are not taken into account in the economic studies currently relied on by many mainstream investment models as used by financial institutions, as highlighted in a recent report by the Institute and Faculty of Actuaries (IFoA) and the University of Exeter.
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