By Huw Jones and Andy Bruce
LONDON, May 24 - Banks and insurers which fail to properly manage climate risks could face a 10% to 15% hit to annual profits and higher capital requirements, the Bank of England said on Tuesday.
"The first key lesson from this exercise is that over time climate risks will become a persistent drag on banks' and insurers' profitability - particularly if they don't manage them effectively," said BoE Deputy Governor Sam Woods in a speech. "Cutting off finance to these corporates too quickly could prove counterproductive, and have wide-ranging macroeconomic and societal consequences, including through elevated energy prices - potentially akin to those whose negative effects we are experiencing today."
"To the extent that climate change makes the distribution of future shocks nastier, that could imply higher capital requirements, all else equal," Woods said, adding that a debate was to be had.
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