The institute’s CEO, Dr Rhian-Marie Thomas, said in a speech at the UK Finance Annual Mortgage Conference that climate change represented the “single greatest systemic risk to the stability of financial services”.
Thomas said: “A challenge for lenders is to prioritise the development of the expertise both internally and through their partnerships, so they can keep oversight of the risks that are building in the mortgage books.
“Climate change needs to become a default part of our thinking. Those organisations that recognise what is going on will prosper.”
Major impact predicted
Thomas said she expected the consideration of climate change to result in “significant cost increases” including “home price declines, mortgage losses and a market correction”.
She then referred to David Burt – a former consultant at Cornwall Capital, a firm which made $80m by foreseeing the subprime mortgage market – who in an interview with Vice warned that climate change would “bust the mortgage market” in America.
She added: “Those who foresaw the risk from underwater subprime mortgages are shifting their focus to the risk of homes sinking underwater.
“They don’t consider the impact of climate change on the mortgage market as a long-term risk. They talk of a market correction beginning within the next year.
“We can dismiss them or decide the time has come to embed science into our financial decision making.”