Climate change will likely become a source of shocks to the financial system in the coming years, FED chief Yellen said at the first meeting of the climate-related Financial Risk Advisory Committee.
She noted that natural disasters and warming temperatures can lead to declines in asset values that could cascade through the financial system. Delayed and disorderly transition to a net-zero economy could lead to shocks to the financial system as well.
Yellen warned that the risks are not hypothetical and are already having a negative impact on the US economy.
In the USA, there’s been at least a five-fold increase in the annual number of billion-dollar disasters over the past five years compared to the 1980’s, even after adjusting for inflation.
States like California, Florida, and Louisiana recently have seen especially severe storms and wildfires. The secretary emphasized that the disasters are taking a terrible toll on the economy. Some insurers are raising rates or even leaving high-risk areas.
Yellen warned that such developments could spill over to other parts of the interconnected financial system. Yellen stressed the need to take climate change into account.
She expressed the hope that the government will be able to increase the resilience of the US financial system to climate change effects.
Sputnik / ABC Flash Point News 2023.