Global Financial Crisis
Crisis
There are four broad ways that the climate emergency impacts the financial system.
Firstly, some companies, like fossil fuel giants, might rapidly lose their value or even see it collapse as economies move away from dirty activities. In 2021, one analysis identified around $56 trillion of financial investments linked to fossil fuels. This is significantly more than the $1 trillion of assets at the heart of the 2007/8 financial crisis.
Secondly, worsening climate shocks have an impact on financial investments. These can be acute, such as extreme storms destroying industrial facilities that give financial assets their value, or chronic, like growing insurance costs from steadily worse extremes.
Thirdly, financial investments will be affected by the wider damage and chaos caused by rising temperatures. For example, the chance of the major food growing regions of the world being simultaneously hit by extreme storms is growing. This could result in a global food crisis, causing general social and political instability, which would affect financial markets.
Fourthly, all these three things could happen at the same time. This has led governments, central banks, and financial companies to begin developing tools for understanding and acting on these risks. But these efforts are far behind what is needed and are only voluntary.
Next round, every player will draw one fewer Local Project card during the start of the Local stage.
If this Crisis was face up during the Local stage and players tucked 2 Regulation tags under it, this effect can be ignored.
Could climate change trigger a financial crisis? (The Economist)
Carbon Tracker is a think tank that follows the risks to the financial system from fossil fuels.
Two task forces are exploring risks to financial systems. One from the climate emergency — the Task Force on Climate-Related Financial Disclosures — and the other for the nature crisis — the Taskforce on Nature-related Financial Disclosures.
But many initiatives are only voluntary and companies are not doing enough to understand and act on risks. A number of groups are holding them to account, including: