Safe to say you can count @ewarren and I among the 94% who are confident that climate risk is not fully priced into our equity markets. finance.yahoo.com/news/financial…
50% of all the CO2 we have ever emitted AS A SPECIES has been released since 1991. The rate of change to our climate system is accelerating. This past summer of wildfires and flooding is not the new normal. The rate of change is the new normal.
Markets are bad at pricing in non-linear rates of change for the same reason our brains are bad at non-linear rates of change. Say 2, 4, and our brain instinctively expects 6, not 8.
For just one piece of recent proof, James Hansen (who warned the Congress to do something about climate change nearly 4 decades ago) is now warning that the rate of warming could double in the next 20 yrs. insideclimatenews.org/news/15092021/…
Meanwhile, the transition to clean energy is also accelerating. Coal was always 50% of our power grid. Now it's less than 30% because it's getting hammered by more competitive clean alternatives. That's not going to slow down, no matter what certain coal-belt Senators may wish.
The fossil fuel sector has been propped up by subsidies so long that it has lost any real ability to innovate in response to a rapidly changing market. It only takes a few bricks to jiggle loose from that dam before le deluge. theguardian.com/environment/20…
That matters because the flood of capital that is moving in response to the physics is coupled with a flood of capital moving in response to the transition to a cleaner future. Both are massive and accelerating. There is very real potential to disrupt our financial markets.
That's why @ewarren and I have been so focused on creating standardized, mandatory risk disclosures for corporations to better quantify where those cash flows are likely to occur. And was so proud to see that bill pass the House. casten.house.gov/media/press-re…
And it's why @brianschatz and I are working to further ensure that our financial regulators use that data to build out the scenarios and put the financial buffers and protections in place "avant le deluge". casten.house.gov/media/press-re…
What's been clear though in both cases is that the data our regulators need to build those protections and mitigate those risks is rarely publicly available, and often not quantified at all. That's a fixable problem. But we are darned near out of time.
So yeah... the risks aren't priced in. Invest accordingly. /fin
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