More extreme heatwaves, droughts, drier summers, wetter winters and rising sea levels are all consequences of climate change which each UK citizen will have to continue to endure.
It is easier to contemplate the increasing impacts of climate change on the individual, but what about the impacts on our wider society? On business, the economy and our financial institutions?
The Bank of England – which has a responsibility to assess the resilience of UK banks and insurers –will be considering the potential impacts from climate change on the UK financial system. The climate exploratory scenario – which starts today – will examine two principal aspects:
- Physical climate risk from chronic and acute events such as flooding or extreme temperatures on productivity, property and other critical assets;
- The changes in the economy linked to the societal response to tackling climate change, such as the effect of widespread withdrawal from fossil-fuel use, known as transition risks.
The Met Office has vast experience of producing climate projections for a variety of sectors, so there was delight when the Bank of England invited us to become an advisory partner alongside Network for Greening the Financial System (NGFS) and OASIS Hub.
Professor Jason Lowe OBE of the Met Office said: “The Met Office is helping organisations to examine climate risks, such as threats to infrastructure or investments. It is clear that organisations realise they are going to have to transform business models, including adapting supply chains and examining investments.”
The Bank of England has particular interest in benchmarking the climate data that financial firms can use to analyse their exposure to physical risk. Jason Lowe added: “Climate projections can present a range of futures and it is important to design a scheme that presents the breadth of possibilities. The suite of climate projections we used – UKCP – is specifically designed to examine the spread of outputs and is ideal for being a part of the benchmark.”
“Climate statistics were calculated at a range of points in the future and for a range of global warming levels chosen by the Bank to link to different levels and rates of potential emission mitigation action and application of climate policy. The Met Office task was to match these to our physical climate simulations. Dr Fai Fung is the Met Office lead for climate services. He said: “The physical warming levels chosen are broadly in line with those being used for the UK’s climate change risk assessment, CCRA3, which will give consistency.”
Jason Lowe added: “It is impossible to know exactly how much greenhouse gas emissions mankind will put into the atmosphere, so studies like this have to consider a range of scenarios if they are to understand the full gamut of risk. Currently there is a good deal of eagerness around the world to cut greenhouse gas emissions, making the so-called high-emission scenarios less likely. However, one lesson from history is that times can change dramatically, so it is important to consider all options, including those which don’t look most likely at the current time.”
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