Ceres submitted formal comments today in opposition to a newly proposed rule from the U.S. Office of the Comptroller of Currency (OCC), explaining how it fundamentally misrepresents climate risk management, and warning that it would put the country’s banking system and economy in harm’s way.
“This proposed rule is an outrageous last-ditch attempt to obstruct progress to address climate change as a systemic financial risk,” said Steven M. Rothstein, Managing Director of the Ceres Accelerator for Sustainable Capital Markets. “The OCC’s job is to ensure the safety and security of the U.S. banking systemic system. Climate change presents a clear threat to that system, and in turn to the U.S. economy and all who depend on it. Banks have begun taking steps to protect against that risk, and the OCC should help them down that path, not throw hurdles in the way. Any proposal that would make it harder for banks to mitigate their exposure to climate risk jeopardizes efforts to maintain sustainable capital markets and to build a more resilient economy. We strongly oppose this rule.”
The OCC introduced the proposed rule, which would restrict banks’ freedom to choose not to fund certain projects or sectors, in November 2020—providing an unusually tight deadline of January 4, 2021 for public comments. Ceres is one of many groups voicing opposition to the rule. Banking associations, institutional investors, and other financial regulators have also filed opposing comments or publically voiced their opposition.
The proposal is widely seen as an attempt to make the oil and gas sector a protected asset class in the U.S. Nearly every major U.S. bank has committed to stop funding oil and gas drilling in the Arctic, while Barclays and JPMorgan Chase have committed to align their lending with the goals of the Paris Agreement or a net-zero emissions pathway.
The commitments come as a recent report from the Ceres Accelerator for Sustainable Capital Markets found that the U.S. banking system’s exposure to climate risk is far greater than currently disclosed by banks or understood by investors or regulators.
In addition to the progress in the banking sector, , U.S. financial regulators have also taken key steps to address climate change as a systemic risk. The Federal Reserve recently announced it had been granted full membership to the Network for Greening the Financial System, a global consortium of central banks focused on climate risk. The Federal Reserve’s latest financial stability report identified climate change as a destabilizing risk to the financial system.
About Ceres
Ceres is a sustainability nonprofit organization working with the most influential investors and companies to build leadership and drive solutions throughout the economy. The Ceres Accelerator for Sustainable Capital Markets is a center within Ceres that aims to transform the practices and policies that govern capital markets in order to reduce the worst financial impacts of the climate crisis. It spurs capital market influencers to act on climate change as a systemic financial risk—driving the large-scale behavior and systems change needed to achieve a just and sustainable future, and a net-zero emissions economy. For more information, visit ceres.org and ceres.org/accelerator and follow @CeresNews.