Beware, Investors, of a Climate Minsky Moment

Climate change could physically impair, destroy or render economically unviable trillions of dollars' worth of assets. The final report from the Task Force on Climate-Related Financial Disclosures can help us understand those risks -- and how to disclose them to investors. It’s a necessarily weighty report, and it invites investors to consider a very nonlinear outcome: what Bank of England Governor Mark Carney calls “a climate Minsky moment.”

This crisis, should it happen, would lead to indiscriminate pressure on climate-exposed asset classes and a potentially dramatic repricing of oil, gas and coal assets. Carney pointed to two drivers of this potential collapse in a Bloomberg Television interview: technology and more detailed disclosures of the risks that climate change poses to physical and financial assets.