UK finance ‘faces £340bn in losses’ without action on climate change
UK banks and insurers will end up shouldering nearly £340bn worth of climate-related losses by 2050, unless action is taken to curb rising temperatures and sea levels, the Bank of England has warned.
The numbers emerged from the Bank’s first climate stress tests on seven of the UK’s largest lenders. These involved three climate scenarios over a 30-year period, covering physical and transition risks, including one in which governments fail to take further steps to curb greenhouse gas emissions, resulting in average temperature rises of 3.3C, and a 3.9-metre rise in sea levels.
The regulator found that without early action, companies would suffer a surge in loan and mortgage defaults, investment losses, and climate-related lawsuits – particularly for insurers – worth £334bn across the UK’s 19 largest banks and insurers by 2050.
“Climate change will inevitably drive losses for banks and insurers – even in a scenario where governments around the world take swift and early action to bring us to net zero,” Sam Woods, deputy governor for Prudential Regulation and chief executive officer of the Prudential Regulation Authority, said.
While banks are likely to survive the Bank of England’s worst case climate scenario, delayed transition efforts – in which governments and industry wait until 2031 to take action – banks alone would still suffer £110bn worth of collective losses.
That is roughly twice the rate of pre-Covid losses recorded by the seven lenders tested in the Bank of England’s climate stress tests: NatWest, Barclays, HSBC, Lloyds, Standard Chartered, the UK arm of Santander, and Nationwide building society.
“The first key lesson from this exercise is that over time, climate risks will become a persistent drag on banks’ and
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