Article content continued

Oilsands are among some of the the highest carbon oil on the planet, yet they are not the only ones facing this test — Zurich is doing the same with coal producers and shale oil operators globally.

This is a business decision to “future proof” its operations, not a public relations move. Insurance companies and banks are limiting their exposure to high-carbon resources because they see (and as insurers, pay for) the damages that can come from climate change. They also fear being left with “stranded assets” as the desired shift to a low-carbon economy renders some oil and coal reserves worthless.

Those dismissing the possibility of crude being left in the ground as Greenpeace rhetoric should be asked to explain why the Bank of Canada just added climate change to its list of main vulnerabilities of the Canadian financial system (along with “rapid change in crypto-asset markets,” “cyber threats,” and housing resales in Toronto).

Insurance companies and banks are limiting their exposure to high-carbon resources because they see (and as insurers, pay for) the damages that can come from climate change

The bank, not known as a bunch of tree-huggers, notes in a recent Financial System Review the rising costs of insured damage due to climate-fuelled floods, wildfires and droughts. The starkest warning, however, is reserved for a failure to “reprice” oil and assets to reflect carbon risk, which could lead to a failure to manage and mitigate risk, resulting in what could be (in the banks’s words) a rapid repricing “fire sale” of oil and gas assets that destabilizes the financial system.

The Bank of England goes further, requiring British insurers to explain how they would manage a low carbon transition that drops the value of oil stocks by 45 per cent and coal by 65 per cent (while increasing the value of renewable energy by 20 per cent).