When, as governor of the Bank of England, Mark Carney elevated climate change to the top of the agenda there was much scepticism.
The Bank’s job was to keep inflation under control and ensure no repeat of the financial crisis of 2008-09 which threatened to sweep away the City and ushered in George Osborne’s austerity.
Carney, who sailed off to become a UN ambassador on climate change, had a point.
This year’s hurricane season in the US, which already has claimed 200 lives in North Carolina and is battering Florida, illustrates the point.
Indeed, the intention by Rachel Reeves to restore monitoring of climate risks as a Bank objective looks sensible.
Forewarning: When, as governor of the Bank of England, Mark Carney elevated climate change to the top of the agenda there was much scepticism
Much of the focus on the financial markets in latest trading was on US headline inflation data which came in at 2.4 per cent last month, a shade above expectations.
The cost of living does not appear threatening enough to prevent a further cut in American interest rates from the present range of 4.75 per cent to 5 per cent.
If there were any doubt about a rate cut then the hurricanes could be the deciding factor. Oxford Economics notes that some 2.8 per cent of America’s output is in the eye of storm Milton currently battering Florida.
The state has 1,350 miles of exposed coastline and a population of 20million, and is important enough to dampen growth.
This is not the space for a ‘Just Stop Oil’ debate. However, weather events are becoming more frequent and costly.
The numbers are on an upward curve, jumping from 12 between 1961-1970 to 19 in the years 2011-2020.
America’s National Oceanic and Atmospheric Administration estimates the cost at a whopping $1.3trillion (£1trillion) or, on average, $22.8billion (£17.5billion) per storm.
Some cost is covered by the federal government’s disaster funds.
Nevertheless, there is always an insurance fallout. As far as financial stability is concerned, the frequency and severity of storms raises serious underwriting and capital issues.
Estimates in the London insurance market suggest that Milton could produce $100billion (£76.6billion) of losses for the global industry.
Cost of disaster: Estimates in the London insurance market suggest that Milton could produce $100billion (£76.6billion) of losses for the global industry
A burden of this size would have a direct impact on Lloyd’s of London and lead to a surge in reinsurance rates.
On current estimates, Milton could be as big as Katrina in 2005 but would not be catastrophic for an industry where risk is well-spread.
But much the same was said about derivatives built on sub-prime mortgages which acted like cluster bombs in the heart of the financial system.
As destructive as the current season turns out to be, its impact on the US should be relatively contained and mainstream insurers able to take the hit.
Sirens for exceptional climate events, which could impact stability, have been sounded.
Lost Trust
The City regulator’s £10.9million fine for TSB for its poor handling of struggling families is not a good look.
It is a bit of an embarrassment for former chief executives, particularly Paul Pester who was in charge from 2013-2018.
He stepped down after a disastrous switch to a new IT system foisted on TSB by new owners Sabadell.
It will not be entirely welcome for Debbie Crosbie, who took over from Pester, and is now in charge of Nationwide and in the process of taking control of Virgin Money.
TSB customers historically were lower down the income scale than the bigger high street banks.
So executives should have recognised the need to prioritise dealings with the most financially stressed customers.
It comes as Spain’s BBVA is seeking to wrestle control of TSB owner Sabadell with a hostile bid.
Could this be a chink in the armour?
Long Goodbye
Unilever has taken an age to extricate itself from Russia, which is a bit rum given its ethical claims.
It argued that it felt loyal to its staff who did not deserve to be punished for the Ukraine war.
The failure to disgorge probably made little difference. Moscow’s economy partly has been kept afloat by Western goods passing through Asia to avoid sanctions.
Troubling!
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