The Simple Truth: Climate Change Portends a Cascade of Destabilizing Financial Market Collapses

[00:00:00]I'm here today because there's a simple fact that climate change is real.

[00:00:08]Earlier this year, I came to the floor and asked my colleagues to agree on that simple known scientific fact.

[00:00:16]Well, they could not.

[00:00:20]So, I turned to the floor several times in hopes that my Republican colleagues could at least agree to some of the simple truths that make up the bigger picture of the reality of climate change.

[00:00:35]I asked if we could agree that oceans are warming, that sea levels are rising, or that the economic harms of climate change are already beginning to hit and will only get worse going forward.

[00:00:51]Every time Republicans objected.

[00:00:55]I do, however, persist.

[00:00:57]Today's simple truth is this.

[00:01:00]Climate change portends a cascade of financial market collapses that could destabilize the national and global economies.

[00:01:11]My question today is can we all agree on that?

[00:01:15]Well, here is my evidence.

[00:01:19]We know that climate change makes many natural disasters more frequent and or could be either more extreme, including hurricanes, floods, and wildfires.

[00:01:36]The same wildfires that blanketed much of the Midwest, Northeast, and Mid-Atlantic in smoke just last week, resulting in American cities like Chicago, Detroit, New York, and Washington having the worst air quality in the world, worse than cities in India, worse than cities in China.

[00:01:55]We know that these disasters are expensive.

[00:01:58]Between 1980 and today, US losses from billion-dollar climate disasters totaled over 3.1 trillion dollars adjusted for inflation. $3.1 trillion lost to Americans. And of course, that only accounts for the 431 disasters that cost over a billion dollars each. There are plenty more harms beyond that $3.1 trillion.

[00:02:31]The trend is projected to continue.

[00:02:34]Modelers for Deloitte, the corporate consultancy, project that unchecked climate change could cost the global economy $178 trillion, $178 trillion US dollars in the period between 2021 and 2070.

[00:02:55]The US economy is in here as a $36 trillion hit in net present value across that half-century span.

[00:03:08]Deloitte's modelers also predict a global GDP decrease of around 7.6% by 2070.

[00:03:20]Other financial experts have warned that worldwide GDP per capita, GDP divided by population, could decline by close to 20% within the next three decades.

[00:03:36]Indeed, in 2023, the now Prime Minister of Canada, Mark Carney, who had previously served as the governor of the Bank of Canada and the Bank of England, testified before the Senate Budget Committee that, and I'll quote him here, "Estimates suggest that over the balance of this century, climate change could reduce the level of global GDP per capita by 10 to 20% without efforts to limit warming, the equivalent of a decade of no economic growth."

[00:04:13]He said, "Similar estimates have been found for the United States, very like Deloitte's projection for the Americas."

[00:04:23]So, that's climate risk.

[00:04:25]Now, let's look at what it means for financial risk.

[00:04:29]An international network of major banks and bank supervisors, including the World Bank, the International Monetary Fund, the Deutsche Bundesbank, and the Bank of England used this illustration about how climate risk hits financial risk.

[00:04:47]The direct economic impacts include tanking property values and lower household wealth.

[00:04:56]Tanking property values and lower household wealth then snowball from individual and family impacts into systemic impacts to the financial system at large.

[00:05:11]This means that climate change could ultimately cause the next systemic financial crisis.

[00:05:19]Financial experts all over the world agree.

[00:05:23]Dr. Benjamin Keys, Professor of Finance at the Wharton School, testified before the Senate Budget Committee as follows.

[00:05:31]"Climate risk is simultaneously inducing heightened risk of flood, storm damage, chronic inundation, drought, excessive heat, and wildfires.

[00:05:42]There is no avoiding the fact that the increasing risk of large global loss events will mean higher costs for consumers.

[00:05:52]Dr. Sean Becker, the former chief economist at the mortgage giant Freddie Mac, warned of rising sea levels and flooding triggering large-scale destruction of coastal property values resulting in an economic shock akin to the 2008 financial crisis.

[00:06:13]And with no expectation that the assets would recover their value.

[00:06:18]Those warnings of Dr. Becker D were based only on the risks of what he called coastal property value crash.

[00:06:27]Not on the growing wildfire threat that is creating a similar insurance debt spiral out west.

[00:06:37]Specifically, as Dr. Becker D testified, you look at the housing crisis of 2007-2008, it was a long time before property values came back.

[00:06:49]But they did come back.

[00:06:51]This is a different type of dynamic where property values are probably physically not able to come back.

[00:06:59]So this is equity that's lost forever.

[00:07:02]It's extremely difficult to estimate nationally.

[00:07:06]I'm not sure I have enough zeros to do it.

[00:07:13]Fed Chair Jerome Powell testified before the Senate Banking Committee in this Congress that in 10 to 15 years it will be impossible to get insurance or a mortgage in certain coastal and fire-prone regions of the country.

[00:07:29]Imagine what happens to the economy in a region in which insurance and mortgages are no longer available.

[00:07:36]It's global as well. The International Financial Stability Board has warned of the cascade of harms rising climate risk to increased insurance premiums and reduced coverage to market withdrawal of insurance causing a danger of mortgage crises and bank insolvencies.

[00:07:59]The warning to the international banking system buckle up.

[00:08:06]The Economist magazine described a possible 25 trillion dollar hit to global real estate markets.

[00:08:16]That's the kind of thing that is bad for bank solvency and that attracted the attention of the International Financial Stability Board.

[00:08:26]While these impacts are global, they will hit home.

[00:08:30]As Dr. Bill Frist former Republican Senate Majority Leader testified climate change is an economic issue.

[00:08:41]It affects individuals, families, and businesses of all sizes.

[00:08:46]The fallout from climate change from increased droughts and flooding to hotter temperatures and rising sea levels costs the United States billions of dollars every year.

[00:08:59]Just yesterday this article which I ask unanimous consent to append to my remarks uh from Alister Marsh entitled Pension Funds Try to Come to Grips with the Scariest Global Warming Scenario in Bloomberg News um quotes an investment research chief at the 300 billion dollar UK retirement assets corporation Standard Life a company that's been around for 200 years any investors not thinking seriously about such risks by mid-2028 would quote really be out of the mainstream.

[00:09:42]This is a mainstream concern.

[00:09:46]And closer to home, JP Morgan has described the impact of any single climate tipping point and we are approaching several any single tipping point being breached as quote highly consequential for investors.

[00:10:06]We are not helpless in the face of these warnings.

[00:10:11]Financial experts and banks who look at this professionally agree that adjusting to our climate reality by organizing an early and orderly transition to a low-carbon economy will avoid costly shocks to the system when a transition away from fossil fuel-related assets becomes necessary.

[00:10:37]It's a little bit like landing a plane.

[00:10:38]If you do it gradually it's much safer and smoother.

[00:10:42]If you crash it can be pretty painful.

[00:10:48]So, this is a simple truth.

[00:10:50]It's well documented.

[00:10:52]We have been warned and warned and warned.

[00:10:58]Unchecked climate change will cascade into danger to the national and global economy.

[00:11:04]So, I ask can we all agree on that?

[00:11:09]And as if in legislative session and notwithstanding rule 22, I therefore ask unanimous consent that the Committee on Banking, Housing, and Urban Affairs be discharged and the Senate proceed to the immediate consideration of Senate Resolution 557.

[00:11:22]Further, that the resolution be agreed to, the preamble be agreed to, and the motions to reconsider be considered made and laid upon the table.

[00:11:33]>> Senator from Ohio.

[00:11:34]>> Reserving the right to object, resolutions like this sound very much mild.

[00:11:41]It actually just is a bunch of words that basically just says um resolve that the Senate recognizes unchecked climate change poses severe risk to national global economies. It seems what's wrong with that? What's wrong with saying something like that? I object.

[00:11:58]>> The objection is heard.

[00:11:59]>> warnings that I've described are now very real.

[00:12:02]We can do nothing about it.

[00:12:05]And that's been the plan in the Senate ever since Citizens United dialed up the fossil fuels industry to influence us with dark money.

[00:12:13]But if we are going to do something about it, we must start somewhere.

[00:12:17]And I would recommend that we start with some really simple facts like the ones that I brought to the Senate floor just now. So, if you don't like my suggestion, let's do something different. But let's just not sit here and do nothing.