The financial sector is fueling climate change. If the investments made by the banks, venture capitalists and asset managers of the City of London were their own country, it would sit above Canada and Germany as the world’s ninth-largest polluter. The financial markets continue to pour trillions of dollars into fossil fuel industries, new oil and gas projects, and carbon-intensive activities. In doing so they are driving themselves, and the planet, towards a cliff edge. The task of redirecting these investments towards the goal of achieving net zero carbon emissions by 2050 is as mammoth as it is crucial if the goal of limiting warming to 1.5°C above pre-industrial global temperatures is to be achieved.
Failing to achieve net zero by 2050 would not just be a human and environmental catastrophe. It would be an economic one. Business as usual, leading to warming of 2°C or 3°C, would break the foundation of the financial system and risk major economic collapse. The adverse impacts of extreme weather events will undermine the ability of insurance companies to evaluate risk, with hurricanes, bush fires and droughts causing entire business models to fail. The consequence is that insurers would set the price for cover at increasingly unaffordable rates. With assets uninsurable, banks will be unable to offer security for loans such as mortgages, and without insurance or banking functioning as before, the entire financial system that today generates so much capital could fail.