Financial firms will "fail to exist" unless they adjust to the risks of climate change, the governor of the Bank of England has warned.
Mark Carney made the claim in an open letter as a collection of central banks launched a report detailing how the financial sector would need to adapt as part of a global effort to reduce carbon emissions.
He penned the letter along with the Governor of Banque de France François Villeroy de Galhau, and Frank Elderson, the chair of the Network for Greening the Financial Services (NGFS), a coalition of 34 central banks and supervisors.
The report follows the Paris Climate Agreement, signed in 2016, in which countries around the world agreed to work to keep a global temperature rise this century well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5°C.
The central bankers warned in their letter that achieving this requires a "massive reallocation of capital".
In the report, the NGFS laid out four main recommendations for the financial sector to turn commitments into concrete action.
- Take a long-term, strategic approach to handling climate-related financial risks, setting expectations to ensure firms address the risks.
- Lead by example by integrating sustainability into investment strategy.
- Collaborate to improve climate-related risk assessments
- Build in-house capacity to manage climate-related financial risks
The UK Labour party's shadow chancellor John McDonnell welcomed the letter as a "breakthrough moment".
He also highlighted the work of the Extinction Rebellion group which has been causing disruption in London this week in a bid to force the government to act on climate change.
More than 200 activists were arrested after train networks were disrupted and major roads blockaded.
Another group of protesters said they had glued themselves to a fence outside the North London home of Labour Party leader Jeremy Corbyn.