Bank of England Backs Down on Mandatory Climate Change Disclosure

Mark Carney, Governor Bank of England.

Mark Carney, Governor Bank of England. By World Economic Forum from Cologny, Switzerland – The Global Economic Outlook: Mark J. CarneyUploaded by January, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=24234760

Guest essays by Eric Worrall

Despite minimal efforts by London banks to disclose their alleged climate risk, the Bank of England has mysteriously opted not to impose mandatory climate disclosure rules.

Banks will not be forced to reveal climate change risks they face

Richard Partington
Economics correspondent
Tue 16 Oct 2018 00.11 AEDT

Critics demand tougher action as Bank of England stops short of call for mandatory reports

The Bank of England has stopped short of forcing financial companies to disclose the potential risks they face from climate change, despite growing calls from campaigners for such action.

The Bank has previously said that only 10% of banks take a long-term view of the risks posed by climate change, while Mark Carney, its governor, has said that failure to adapt would have a “catastrophic impact” on the financial system.

Although opting against mandatory disclosures, the Bank said firms ought to identify a senior manager with responsibility for managing the financial risks posed by climate change, with clear “board-level engagement”.

Read more: https://www.theguardian.com/environment/2018/oct/15/banks-will-not-be-forced-to-reveal-climate-change-risks-they-face

I believe the Bank of England backed way from mandatory disclosure, because forcing the application of strict accounting rules to IPCC predictions would unequivocally reveal what a pile of junk they are.

Consider the change in estimated equilibrium climate sensitivity from AR4 to AR5.

AR4: likely to be in the range 2 to 4.5 °C with a best estimate of about 3 °C, and is very unlikely to be less than 1.5 °C. Values substantially higher than 4.5 °C cannot be excluded, but agreement of models with observations is not as good for those values

AR5: there is high confidence that ECS is extremely unlikely less than 1°C and medium confidence that the ECS is likely between 1.5°C and 4.5°C and very unlikely greater than 6°C.

The AR5 estimate covers a wider range than AR4, and AR5 ditches the best estimate climate sensitivity of 3C.

In my opinion this rising uncertainty represents a fundamental failure of the underlying theory. Different attempts to estimate climate sensitivity are producing wildly different results.

Worse, there appears to be no real quality control of the compilation of at least some major climate datasets used by the IPCC, datasets which are being fed into the divergent climate sensitivity estimates.

A lone outsider recently conducted an audit of a major climate dataset and discovered HadCRUT4 is riddled with errors; really basic, obvious stuff like spelling mistakes and impossible temperatures and geolocations.

As JoNova points out, the Hadley MET Centre which produces HadCRUT4 employs thousands of full time staff, yet none of those staff were assigned to do the most basic inspection of the data underlying one of their most important climate products.

Company auditors are in a very different situation to climate scientists. There are no real consequences if a climate scientist is sloppy or makes basic mistakes, but if a company auditor gets it wrong, they can be sued, or they could even go to jail.

If I was an auditor stuck with the impossible task of making sense of such poor quality data, while trying to avoid personal legal jeopardy, the most significant risk I would include in the disclosure statement would be the risk that the climate data used as the basis of the disclosure statement might be utterly unreliable.

Perhaps the risk of this embarrassment is the real reason the Bank of England backed down on demanding mandatory climate disclosure statements.

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46 thoughts on “Bank of England Backs Down on Mandatory Climate Change Disclosure

  1. The Auditor or “Climate Change Financial Risk Manager” would only have to go to the latest IPCC publication and recommend to the Board that the prognostications from the IPCC are so idiotic that it is impossible to calculate risk, and therefore recommends that the risk is considered to be zero until more satisfactory data is available.

    • Just about the last thing that needs to be taken into account in a Banks risk assessment is fricking “climate change”.

      There is a systemic risk from corporate malfeasance, which nearly collapsed the global banking system and with it modern civilisation in 2008.

      If these left wing twats would stop bleating about CO2 and start paying attention to something which actually mattered to society, we may get somewhere. First get rid of the Financial Stability Board ( FSB ) and remove the carte blanche, get-out-of-jail-free card that protects any officer of a “systemic bank” from any and all legal process under all jurisdictions in the world.

      No one from a major “systemic” bank nor any of their officers has even been charged after 2008. Christine Lagarde , head of IMF was found guilty of criminal misconduct by French courts but received ZERO fine or or custodial sentence. Yes, read that again. She was found GUILTY but there is NO PUNISHMENT.

      How does that work ???

      • Corporate malfeasance was at most the third biggest factor in the global financial crisis of 2008. The first was the U.S. government forcing banks to give out an ever increasing number of sub-prime mortgages, and the second being the structure of the Euro (one currency without a fiscal union) combined with massive government debts. No one has been charged because the bankers merely have to point to the government regulations imposed upon them, and there’s no way Bill Clinton is about to volunteer for prison.

        Lagarde’s case had nothing to do with the financial collapse, but with oversight of a single (albeit very large) payment to a businessman. And when the prosecutor says the case was “very weak” and falls into the category of politics and not criminal misconduct, that tends to make the sentence extremely lenient.

        • No one has been charged because…

          It is not true that “no one” was charged. There were a couple of people from minor banks , not on the FSB list of “systemic banks”. They can be prosecuted .

          You need to read up on the FSB and it’s reach. Find out why Britain’s chancellor of the exchequer at the time, George Osborne, was sitting in on all the meetings of US DoJ considering action on US banks and why he stated that he was there to ensure “international standards” were applied. What standards was he referring to and who gave him that authority?

          Then you will start to understand why no major US band nor any executive of those banks was persecuted: they have immunity. They are quite literally above the law.

        • “but with oversight of a single (albeit very large) payment to a businessman”

          Not a payment. An arbitration to limit a crazy risk.

          Tapie was asking for
          1) cancelling the sell of 70% of Adidas (not possible)
          2) next best thing: about 70% of the value of Adidas: Tapie asked for BILLIONS.

          After that verdict Tapie got a comparatively small amount.

          Then the so-called judges invalidated the arbitration after months of media attack on Tapie and Lagarde, for the obvious purpose of politically harming President Sarkozy.

          Low IQ people cheered.

          It was a political witch hunt from the start. The arbitration decision was good.

        • “Lagarde’s case had nothing to do with the financial collapse”

          Actually that case had to do with a very big nationalized bank, the Crédit lyonnais, that had fraudulent financial collapse and cost taxpayers billions of Francs. Just not “the” financial collapse.

          It’s amusing that people equate crooked bank official not being jailed (or even tried) and Lagarde, who is accused of helping a victim of crooked bank, being tried.

          Those who accuse Lagarde are on the side of the banksters.

          French politicians always side with banksters, especially when they are socialists (they are all socialists anyway), when they say they dislike rich people (like quite rich former French president Hollande), they dislike finance (like Hollande, who defended French banks found guilty in the US).

          All French politicians are very anti business and anti rule of law.

      • You are just parroting anti-Sarkozy propaganda. I guess you wouldn’t be able to cite any relevant fact in that story, or even what Lagarde was found “guilty” of.

        Christine Lagarde was guilty of strictly nothing. It’s an imaginary accusation.

        Arbitration is legal. The matter was purely civil and clearly arbitrable. No, it wasn’t an state matter; no, the fact that a bank is state-owned doesn’t change the applicable laws. No, the fact that the CDR is established by law doesn’t make it a French administrative entity. Yes, the real parties to arbitration were the CDR and its brother societies (CDR-something). No, the EPFR, the administrative entity overseeing the CDR, was not a party. No, the EPFR committee did not vote for arbitration, but against veto.

        Yes, Monsieur De Courson, a member of the parliament, was wrong to say that the CDR was a fake society and not really anonymous when the Law makes it an anonymous society. Monsieur De Courson (who is also very vaxxer, that is not a coincidence) just reads the French Law to deny the very words of French Law.

        No, it wasn’t a good idea to ask the administrative courts to confirm that the CDR could be a party to arbitration. The CDR had been such a party several times. A judicial crisis would have been created if a so-called judge decided otherwise for political reasons. France’s reputation would be more destroyed.

        Yes, the cassation verdict was in favorable to the party of the “liquidateurs” that is the Tapie couple. No, the cassation did not say anything about who was or was not a victim, just that the applicable laws could be invoked by victims of the vicious conspiracy by the bank.

        No fault in the decision was found. The decision was validated by both civil and administrative orders; both the TA and CAA both found that the decision to not oppose arbitration was legal and based on realistic considerations (the CE refused to even reconsider the CAA decision).

        Years before the CA had found Tapie to be the victim of the CL.

        Also, if you can count: you can’t get the arbitration verdict you want with one corrupt judge among three. Also, the fact that Tapie was the victim was the conclusion of all three judges. (But no French “journalist” can count to three.)

        The real story is that the Crédit lyonnais victimized Tapie not once but several times, and managed to avoid punishment.

        In the story, the international reputation of French courts was destroyed. The arbitration was essentially cancelled for political reasons. An arbitration regarding the transfer of a German corporation from another German incorporated entity to a French buyer was described as strictly national.

        I don’t see how anyone can feel easy using the services of any French bank, or doing any serious business covered by French law after that disaster.

        Note that the opposition to the idea of arbitration followed the win by Tapie. It’s a 12th hour objection, like the opposition to the electoral college after the win of Donald Trump.

        Many people in France cheered because the bank could get away with a vicious conspiracy to defraud a client. France is doomed.

    • Corporations deal with this level of uncertainty all the time – legal issues are the most usual example.

      Generally, a reserve (or charge) is made when all 3 of the following criteria are met:

      1) The dollar value of the risk is known
      2) The timing of the risk is known
      3) The probability of the risk is reasonably high.

      It’s doubtful “climate risk” meets any, let alone all of the requirements.

  2. The Auditor or “Climate Change Financial Risk Manager” would only have to go to the latest IPCC publication and recommend to the Board that the prognostications from the IPCC are so idiotic that it is impossible to calculate risk, and therefore recommends that the risk is considered to be zero until more satisfactory data is available.

    • I would not bet much on the courageousness of a political auditor.

      In fact, I would bet exactly nothing on it.

  3. 2019 will see a double celebration in the UK: departure from the EU (OK, in name only, but still worth getting drunk for), and … the departure of Mark Carney from the BoE, unless of course the UK govt persuades him to stay on to see us through the imminent climate tipping point.

  4. “As JoNova points out, the Hadley MET Centre which produces HadCRUT4 employs thousands of full time staff”

    Really, thousands? That would require a salary/benefit budget of hundreds of millions of dollars alone. This is verging on a large cap corporation.

    • I took a quick look around the Hadley MET Centre web site and did not find any institutional or financial information. But Wikipedia says

      “The Met Office employs over 1500 staff, with approximately 200 working in its climate research unit. Most of its funding comes from contracts with the Department for Environment, Food and Rural Affairs (DEFRA), other United Kingdom Government departments and the European Commission. It also works closely with the Intergovernmental Panel on Climate Change (IPCC) providing worldwide climate forecasting and predictions.”

      • As JoNova points out, the Hadley MET Centre

        NO! JoNova did not say that . She know enough to get the name right. The “Hadley MET Centre” does not exist. You are trying to refer to the UK Meteorlogical Office’s Hadley Climate Research Centre.

        So it’s a climate centre not a “Met centre”. Once you realise that the UK Met Office is the national weather service , NOT a climate research centre, the staff levels you comment on may make more sense to you.

        Also the land portion of the land + sea average HADCRUT4 is run by UEA “climategate” Climate Research Unit ( CRU ) , so you are seriously uninformed about the most basic facts you attempt to write about.

        I’m not criticising or accepting the rest of you article, since anyone the dumb-assed ignorant in the opening paragraphs, I just don’t see the point in reading further.

        If you are going to cite Jo Noca, at least do here the courtesy of a proper cut and paste, instead of making up your own ill-informed garbage and then attributing it to Jo.

        • Well, you could at least spell “Nova” correctly, before you have a rant.

          BTW What does ” since anyone the dumb-assed ignorant in the opening paragraphs” mean?

  5. Carney’s contract has been extended until early 2020. Why the Government would have been so stupid is beyond me. Carney has been a very poor bank governor.

    • In fairness, the day after the Brexit vote the UK didn’t collapse and the Pound never ceased trading.

      Carney can’t take credit for the former but he can for the latter. It’s a great achievement.

  6. Too late, the next global recession is going to be caused by Greens and climate over reach with large scale industry contractions and debt demise. Hold on.

    • No, the next crisis will be caused by the same people as the last one. And it was not the greens. It was a corrupt and unregulated banking system.

      • Oh, I thought it was caused by AAA-rated junk securities sold to pensions and other fixed income buyers far and wide.

  7. Risk from climate change, zero.

    Risk from legislations pretending to be about preventing climate change, infinite.

    • +10

      The Bank of England has stopped short of forcing financial companies to disclose the potential risks they face from climate change . . .

      . . . because climate change has been around since the sun first rose. IOW, it’s a hoax. The boys who’re diddling with the weather these days? Can you say on-call climate change? Drought? Storm intensification? To justify the hoax?

  8. In my opinion this rising uncertainty represents a fundamental failure of the underlying theory.

    A theory that claims that the thin, cold layer of air around our planet can warm our oceans all the way to the bottom is not a theory, it is total madness.
    It should be totally obvious that the solar heated surface layer warms the atmosphere iso the other way around.

    • That’s a bit of a strawman.

      The surface is mostly heated by the sun, and it keeps the atmosphere nicely warm, at least in Florida. But that does not mean removing atmosphere or adding more gases to it would not change the surface temperature. We’re still asking, according to the IPCC, is the warming at 560 ppm 1.5K or 4.5K or even something else. They pretend now that even 1.5K is dangerous to keep their money flow intact.

      Settled science indeed.

      • That’s a bit of a strawman.

        Don’t think so. In the Cretaceous the bottom water temperatures were 10 maybe 18K higher than today. High surface temperatures in that period are blamed on high CO2 levels.
        Is also the other way around. High deep ocean temperatures then were caused by gigantic magma eruptions like the Ontong Java one (~100 x 10^6 km^3).
        Sun only increases the temperature of the mixed surface layer a bit above the deep ocean temperatures.

        But that does not mean removing atmosphere or adding more gases to it would not change the surface temperature.

        The atmosphere just reduces the energy loss to space. Removing it will certainly result in a temperature drop. Doesn’t mean the atmosphere is INCREASING the surface temperature. A higher mass of the atmosphere will increase its insulation effect, but the change of CO2 from eg 250 to 500 ppm is totally irrelevant.

  9. shows the difference between those with actual skin in their game, in this case bankers and those who can say or do anything they like as they have no skin in the game,the cagw industry in general.

  10. The only thing required that would go a long way to alleviating future problems from any future inclement weather is the Boy Scout motto…Be Prepared. Mark Carney and the Bank of England would be better off paying to attention to simple and plain advice and it appears they backed off falling into the ‘carbon’ trap. The current madness thinking we can influence future weather on any meaningful scale by decarbonizing the economy, is just sheer lunacy. The Precautionary Principal should apply both ways: Don’t do something so fundamentally flawed as shuttering an entire economy through decarbonization on a currently poorly understood cause and effect of long term climate.

    We would be much better off hardening our defences to the worst inclement weather and events to the degree it is fiscally available. We can pretty much be assured that we will get some type of natural disaster dependant on the nature of any local area. In forested areas .. fire, in flood plains.. floods. In hurricane prone areas, it will be hurricanes. Since we know the law of averages sooner or later will deliver some type of natural calamity, then it is best to plan for the worst and harden the infrastructure to withstand or limit the damage and have a plan to deal with the worst event. It only has to work once to pay for itself. Sort of like building to an earthquake event, planning to limit damages to a potential size. You can’t protect everything to a magnitude 9, but we can build in some defences to defend from the majority of events. And have a plan to deal with the fallout and get back on track.

    Sometimes we humans are just in the way no mater what we do, especially now that we have higher population densities in area’s that used to be low population densities which is now what is causing the massive economic losses. Obviously, if there were few people there, there would be few human losses. But to think that if we take radical steps to limit GHG’s in the future, that that will be enough to ensure there will be no more weather related calamity is even stupider than thinking the GHG’s caused the inclement weather in the first place.

  11. How about the financial risks posed by possible space alien invasion? Banks should be forced to disclose those.
    In fact, there are any number of financial risks, such as asteroid collisions. Or what about a worldwide zombie uprising, have they thought of that?

  12. Bank of China & China Construction Bank are somewhat disappointed.
    Their 3c West Killer strategy (Coal, carbon tax, climate risk) just suffered a minor setback.
    No problem there’s still plenty to laugh about in Beijing . . .

  13. Providing a statement about the ‘risks’ of “climate change” would be acceptable only as long as the benefits of NOT following climate change dogma is also fairly presented. I already know which way the pendulum would swing!

  14. It’s the European way.
    Such rules are to be treated more as advice than as laws to be obeyed or strictly enforced (especially if you are French or German corporations). Despite the upcoming Brexit it seems they have at least learned something from their EU colleagues.

  15. I refer to the statement, “I believe the Bank of England backed way from mandatory disclosure, because forcing the application of strict accounting rules to IPCC predictions would unequivocally reveal what a pile of junk they are.”

    As a retired company auditor, I endorse the above statement as being 100% correct.

    For there to be accounting rules to cater for IPCC predictions, it demonstrates just how PC & out of touch the accounting standard setters have become, living in a mixed up world of make believe.

    The risk and uncertainty associated with changing weather & climate conditions, on any time scale, are impossible to determine with any beneficial level of confidence. This is the situation with any system that is simply too unpredictable, too complex, too chaotic, and too little understood.

  16. I was sat in a restaurant in London the other week, and Mark Carney was sat next to me with what looked like his two young daughters. They were having a quiet chat, when some woman suddenly walked up to them and said, “Are you Mark Carney? I’m your biggest fan! Can we have a selfie together?”. Carney looked a bit surprised, but agreed to the request and the woman duly whipped out her smartphone to take a snap.
    Needless to say, she was dressed in the regular hippy outfit: lots of lace and tie-dyed clothes.

  17. One Christmas not so long ago in the UK
    I read an article about a consumer led recovery on a UK mainstream media outlet.
    I read another article which told that many credit cards were issued in the UK, to the least likely to be able to repay.
    I read another article that told that British persons with X amount of monies invested were to be penalised with lower interest returns.
    I read another article which told how Brit’s with money / well to do Brit’s shopped abroad & not at home.
    *
    The UK banks approved vast amounts of credit cards to poor persons who would most likely default.
    The advantage of giving credit to poor persons is that they will spend the money at home.
    Hence the consumer lead recovery.
    The banks will carry the losses ??
    Not so fast –
    The lowering of the interest paid on investments paid for the credit card led recovery.
    Mark Carney is a genuine Robin Hood … robbing the rich to aid the economy.

    Mark Carney was crash hot on BAIL-IN, where the bank gets to pay its frenzied gambling losses with 9% of their customers money.

  18. Risk of exposure to Climate Change?

    How about risk of Alternate Energy Investments which are economically unsustainable?
    Pull the subsidy plug out and the scheme collapses under its own weight!

    Poster-child Germany now spends some 34 Billion Euros annually on its Renewable Energy Law, which is in fact nothing other than an expensive Virtue-Signaling exercise. Fossil fuels as a percentage of total energy production are flat at about 60% (and they have been for over a decade). That the citizens of Germany continue to put up with this financial boondoggle is mind-boggling. It makes as much sense as opening the floodgates of immigration without a plan how to make it work (financially or socially). All the while these same politicians like to hide behind the tired phrase, “We care about our Grandchildren’s Future.” Right.

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