Thursday, July 7, 2022

US Regulators Unveil Plan To Tackle Financial Climate Risks

Climate change is a “new threat” to US financial stability that regulators must address in their day-to-day work, the US Supreme Regulatory Commission said Thursday, for the first time for the United States, which has lagged behind other wealthy countries in addressing financial climate risks.

The Financial Stability Oversight Board (FSOC) has released a 133-page report that could lead to new regulations and stricter oversight of Wall Street. He provided a roadmap for integrating climate risk management into financial regulation.

This includes filling data gaps, promoting the disclosure of climate-related information by companies, strengthening climate expertise in agencies, and building tools to better model and predict financial risks, such as scenario analysis.

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The FSOC is made up of the heads of the leading financial agencies and is chaired by Treasury Secretary Janet Yellen. Created in the aftermath of the 2007-09 financial crisis, its role is to identify and remediate vulnerabilities in the US financial system.

FILE – Treasury Secretary Janet Yellen listens during a meeting at the White House campus, October 6, 2021.

This report is part of President Joe Biden’s plan to aggressively tackle climate change and is prepared for his trip to Glasgow, Scotland, for the United Nations Climate Summit.

“This is an important first step forward towards the threat of climate change, but by no means the end of this work,” Yellen said in the report.

As Biden’s climate agenda has stalled due to divisions in Congress, the report will send a signal to the world that the United States is serious about tackling climate risks, adding to the global debate on the issue.

“This is the first time that all banking and financial regulators will come together in one document and talk about what they can do about climate change,” said Todd Phillips, the liberal-minded director of financial regulation at the Center for American Progress. tank.

Climate change could turn the financial system around, according to risk experts, as physical threats like rising sea levels and policies and carbon neutral technologies to slow global warming could wipe out trillions of dollars in assets.

In a 2020 report, the Commodity Futures Trading Commission (CFTC) cited data that could ultimately be lost between $ 1 trillion and $ 4 trillion in global fossil fuel wealth. With a record $ 51 billion going to US sustainable development funds in 2020, investors are looking to gain more insight into the risks companies face from climate change.

US regulators have done little to date to address climate risks, and the United States is lagging behind its counterparts on this issue. Biden, a Democrat, said he wants every government agency to start putting climate risks on its agenda.

The report also called for the FSOC to create two new internal committees. One of these will be composed of regulators who will frequently report on efforts to manage climate risks. The second will be an advisory committee of external experts, including from academia, non-profit organizations and the private sector.

The lack of recommendations for tough new rules has upset some proponents of progress and environmental groups who are worried about Washington’s bold moves to overcome what Biden himself has called an existential crisis.

Stephen Rothstein, managing director of Ceres Accelerator for Sustainable Capital Markets, a climate protection group, said that good regulators have identified climate change as an undeniable risk, but others are about to emerge soon.

“With a very small window to prevent the next climate catastrophe, each agency must now provide a specific time frame for when they plan to take action to protect the safety and resilience of our financial system, our institutions, our savings and our communities,” he said. said in a statement.

Nation World News Desk
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