In his famous speech called “Breaking the tragedy of the horizon—climate change and financial stability” to the insurance market Lloyd’s of London, Mark Carney, governor of the Bank of England, starts by explaining that “Climate change is the Tragedy of the Horizon” and that “once climate change becomes a defining issue for financial stability, it may already be too late”.

He then points out three risks through which the financial stability can be affected because of climate change: the physical risk, the liability risk and the transition risk. However, he finishes by explaing that “By managing what gets measured, we can break the Tragedy of the Horizon. With better information as a foundation, we can build a virtuous circle of better understanding of tomorrow’s risks, better pricing for investors, better decisions by policymakers, and a smoother transition to a lower-carbon economy.”

This publication is related to the Principle 2 and the Work Stream 1 of the Climate Action in Financial Institution Initiative: