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U.S. Regulators Step Up to Face Climate-Related Financial Risks

By Ceres
Posted June 30, 2022 at 4:17pm

A new climate scorecard released by Ceres shows that U.S. financial regulators across nine federal agencies have taken 230 actions since April 2021 to tackle the financial risks of climate change, a clear sign of regulatory progress.

The 2022 Climate Risk Scorecard: Assessing U.S. Financial Regulator Action on Climate Financial Risk, provides an in-depth analysis of the action steps that the agencies have taken to protect our capital markets, financial institutions, and communities from the effects of climate risk. Among the agencies scored include the Federal Reserve Bank (The Fed), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), the U.S. Securities and Exchange Commission (SEC), the Municipal Securities Rulemaking Board (MSRB), the Commodity Futures Trading Commission (CFTC), the Federal Housing Finance Agency (FHFA), and the U.S. Department of the Treasury.

The agencies are members of the U.S. Department of the Treasury’s Financial Stability Oversight Committee (FSOC), which mandates collective action and accountability for identifying risks and responding to emerging threats to financial stability of the U.S. economy. In October 2021, the FSOC released a report, affirming for the first time that climate change is an emerging threat to the U.S. financial system.

Key findings of the report include:

  • All nine agencies have publicly affirmed climate as a systemic risk to the financial system.
  • All nine agencies have made progress in identifying the data needed to evaluate these risks and develop a plan to procure data they need.
  • For those agencies with authority that encompasses the needs of financially vulnerable communities, there is greater variation in progress.
  • Each agency has designated staff to focus on climate-related risks, with all but one appointing senior staff to lead those teams.
  • Several agencies have begun to incorporate climate risk into their supervisory activities.
  • Despite the strides that federal financial regulators have made they still lag far behind some of their global counterparts and what the latest climate science demands are. This regulatory gap could adversely affect U.S. companies and stifle their competitiveness in the global market. While it is encouraging to witness U.S. regulators acknowledging and acting on the climate threat, they must move faster. They are poised to seize on the urgency of this moment and take quick, deliberate and decisive actions to accelerate their progress—and protect the future of our financial system and spur an equitable, economic transformation for all.

Visit ceres.org/scorecard to learn more and download the findings.