"Climate change is becoming increasingly relevant to central bankers because losses from natural disasters that are magnified by higher temperatures and elevated sea levels could spark a financial crisis, a Federal Reserve Bank of San Francisco researcher found.
“Climate-related financial risks could affect the economy through elevated credit spreads, greater precautionary saving, and, in the extreme, a financial crisis,’’ Glenn Rudebusch, the San Francisco Fed’s executive vice president for research, wrote in a paper published Monday.
“There could also be direct effects in the form of larger and more frequent macroeconomic shocks associated with the infrastructure damage, agricultural losses, and commodity price spikes caused by the droughts, floods, and hurricanes amplified by climate change,’’ according to Rudebusch, who is also a senior policy adviser at the reserve bank."
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