#Banks & #Mortgage Market have not adequately priced-in #ClimateChange

“Financial Markets today have not adequately priced-in the likely near-term policy response to climate change”



A UN-supported entity called Principles for Responsible Investment, PRI — whose membership includes some 500 global asset managers — predicts a market “response by 2025 that will be forceful, abrupt and disorderly because of the delay”. In plain English, they expect a market shock.



A McKinsey consultant gave the UN a couple of examples of where “disorderly” repricing might occur. Coastal regions such as Florida, he warned, could deliver asset price shocks for lenders, insurers and homeowners. So, too, in places such as Spain, southern France, Greece and Italy which are projected to see eye-popping increases in drought. 

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Using a synthetic portfolio of 100,000 residential mortgages in southern Florida — based on the exposure of a real bank — Jupiter, a climate advisory group, forecasts a tripling of losses from flood damage in the next couple of decades.

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American households typically use 30-year mortgages to buy properties, [but] the price of insurance is reset annually. There is, in other words, an embedded maturity mismatch in risks in the Florida property markets that could spark mortgage defaults, hurting borrowers and lenders.





See the full article on the FT here:  Climate change could cause a new mortgage default crisis