Mark Carney, head of the Bank of England, has said a move to a low carbon economy, that is too quick, could damage the financial stability of the UK.
According to Carney, a sudden redirection of funding away from the oil and gas sector, coastal real estate, amongst others could have severe financial implications to the markets.
He said: “Too rapid a movement toward a low-carbon economy could materially damage financial stability.”
In a speech, Carney referred to the work of Hyman Minsky, who is known for theorising the “financial-instability hypothesis”, which suggested long periods of economic prosperity when people acquire wealth and debt would result in a financial calamity – as seen in the 2008 financial crash.
Carney said: “A wholesale reassessment of prospects, as climate-related risks are re-evaluated, could destabilise markets, spark a pro-cyclical crystallisation of losses and lead to a persistent tightening of financial conditions: a climate Minsky moment.”