Sleeping Financial Giants - Opportunities in financial leadership for climate stability

This report has two primary aims. The first is to introduce to the financial sector the notion of tipping elements and to provide a short, state-of-the-art review of the scientific knowledge surrounding this rapidly evolving field of enquiry. Second, it makes explicit the links between the investment sector and such tipping elements, and outlines a preliminary approach for how to examine such links using two cases: the Amazon rainforest and the boreal forests of Russia and Canada. Our focus on the forested tipping elements (the Amazon rainforest and the vast boreal forests of northern high latitudes) is motivated by the fact that these biomes represent tipping elements that lie at the intersection between high vulnerability to tipping in the next few decades and increasing human pressures, and where the financial sector is playing a crucial role in supporting these pressures. But the financial system can also provide an important lever to help ensure the stability of these tipping elements. The report concludes that the Amazon rainforest, boreal forests and other identified tipping elements are now systemic risks for the global financial system. If the internal dynamics of these large regions change, leading to the soils and forests emitting large volumes of carbon into the atmosphere, then stabilizing the climate in the future will become significantly more difficult, affecting financial stability. Action now, and in the next decade, can greatly reduce this global systemic risk. Time is short. Financial actors, and humanity at large, need to wake up and recognize that the emerginginsights of tipping dynamics and nonlinear change in the Earth System present additional, novel and urgent challenges.

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