BoE warns of climate-linked losses. Should you invest in NWG, STAN, HSBA?

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BoE warns of climate-linked losses. Should you invest in NWG, STAN, HSBA?

 BoE warns of climate-linked losses. Should you invest in NWG, STAN, HSBA?
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Highlights

  • Delaying climate action on projects may cost £350 billion extra to the UK financial sector by 2050, a BoE report stated.
  • The report explored by the Climate Biennial Exploratory Scenario (CBES) tested a total of 19 banks and insurers in the UK.
  • The BoE has recommended lenders and insurers should take climate action immediately.

The Bank of England (BoE) published the results of its climate stress tests on Tuesday, which stated that delaying climate action may cost £350 billion extra to the financial sector by 2050 if no further action is taken to cut carbon emissions.

Delaying climate action may cost £350 billion extra to the financial sector by 2050, a report has stated

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The report explored by the Climate Biennial Exploratory Scenario (CBES) was the first comprehensive stress test on climate change, which tested a total of 19 banks and insurers in the UK. The test assessed the resilience of the UK financial sector to various climate scenarios over a period of 30 years.   

The BoE has asked lenders and insurers to take climate actions immediately or face a 10% to 15% hit to annual profits and higher capital requirements. Climate activists are urging lenders to cut financing projects involving fossil fuels. The report stated that if early action is not taken against the defaulters, participating banks may face £110 billion of collective losses in investments, loan and mortgage defaults, and climate-related lawsuits.

Last month, the BoE’s Prudential Regulation Authority (PRA), which oversees around 1,500 lenders in the country, stated that it will switch from assessing climate-related risks to supervising the projects and actions taken against defaulters.

Let us look at 5 FTSE 100-listed lending stocks that were tested in the BoE’s climate stress tests.

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1.     NatWest Group Plc (LON: NWG)

The shares of the UK-based banking and insurance holding company, NatWest Group Plc, were up by 1.06% as the market opened at around 8:00 AM (GMT+1) on 25 May 2022, at GBX 218.80. The current market cap of the company stood at £22,690.12 million.

The FTSE 100 index constituent has provided its shareholders with a return of 8.19% over the last one year as of 25 May 2022, while its YTD return stood at -3.15%. 

2.     Standard Chartered Plc (LON: STAN)

The shares of the multinational banking and financial services company were down by 0.13% as the market opened at around 8:00 AM (GMT+1) on 25 May 2022, at GBX 614.80. The current market cap of the company stood at £18,269.92 million.

The FTSE 100 index constituent has provided its shareholders with a return of 21.30% over the last one year as of 25 May 2022, while its YTD return stood at 37.11%. 

Stress test on climate change tested a total of 19 banks and insurers.

©2022 Kalkine Media®

3.     HSBC Holdings Plc (LON: HSBA)

The shares of the multinational universal bank and financial services company, HSBC Holdings Plc, were up by 0.25% as the market opened at around 8:00 AM (GMT+1) on 25 May 2022, at GBX 520.20. The current market cap of the company stood at £104,325.56 million.

The FTSE 100 index constituent has provided its shareholders with a return of 16.67% over the last one year as of 25 May 2022, while its YTD return stood at 16.01%. 

4.     Barclays Plc (LON: BARC)

The shares of the multinational universal bank were up by 1.13% as the market opened at around 8:00 AM (GMT+1) on 25 May 2022, at GBX 164.24. The current market cap of the company stands at £27,297.08 million. The FTSE 100 index constituent shares depreciated in the last one year, its return was -8.72% as of 25 May 2022. Its YTD returns stood at -12.26%.

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5.     Lloyds Banking Group Plc (LON: LLOY)

The shares of the multinational British retail and commercial bank, Lloyds Banking Group Plc, were up by 0.39%, at GBX 44.18, as the market opened around 8:00 AM (GMT+1) on 25 May 2022. The current market cap of the company stood at £30.435.46 million.

The FTSE 100 index constituent share value went down in the last one year and stood at -9.08%, as of 25 May 2022. Its YTD return stood at -7.41%. 

Note: The above content constitutes a very preliminary observation or view based on market trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.

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