BY ADAM TOOZEGRAPHICS BY VALERIO PELLEGRINI
In October 2012, the global financial system got its first taste of the effects of climate change when Hurricane Sandy roared through lower Manhattan, shutting down Wall Street. Amid the blackout, the power remained on in the tower containing the headquarters of Goldman Sachs, offering to the world a striking if accidental symbol of a future age of climate inequality.
As the investment bank stood firm, the U.S. government’s outpost on Wall Street, the New York branch of the Federal Reserve, made plans to pull up stakes. In response to the hurricane, the Fed created new backup capacity for market operations farther inland, at the Federal Reserve Bank of Chicago.
Descended from historical port cities, it is not by accident that the world’s leading financial centers—New York City, London, Singapore, Hong Kong, Shanghai—are vulnerable to flooding. But the larger challenge that climate change poses is not so much the physical as the systemic risk. What central bankers—the world’s preeminent economic decision-makers since the 1980s—are beginning to worry about is the potential for climate change to trigger financial crisis.