Today, the Financial Stability Oversight Council (FSOC), chaired by the U.S. Treasury Secretary, comprising all of the federal financial regulators overseeing the world’s largest economy, released a report identifying the financial risks that climate change poses to the U.S. economy and markets. The report marks the first time that U.S. financial regulators have spoken with one voice and outlined their commitments to address climate risk.
The report, required by the Biden administration’s as part of the Executive Order on Climate-Related Financial Risk, was meant to “assess[ing], in a detailed and comprehensive manner, the climate-related financial risk, including both physical and transition risks, to the financial stability of the Federal Government and the stability of the U.S. financial system.” The report follows a package of federal actions released last week meant to address climate financial risk.
“For the first time in the report, these financial regulators have now unequivocally stated that climate change is an emerging threat to the financial stability of the United States. While individual US regulators have affirmed climate as a financial risk and begun taking action, this report marks their first collective pronouncement of the scale of risk posed to our economy by climate change,” said Steven M. Rothstein, Managing Director of Ceres Accelerator for Sustainable Capital Markets at the sustainability nonprofit Ceres. “Banks, insurance and fossil fuel companies should be on notice. Climate change causes tens of billions of dollars in damages annually and the US has committed to cut emissions by 50% by 2030. This has dramatic implications for US workers, retirees and homeowners, the people’s money is at risk. For this reason, we welcome the FSOC report that lays out initial steps financial regulators are taking.”
Rothstein added, “Now it is vital that each agency disclose specific plans on how it will deliver. With a very small window to prevent the next climate disaster, each agency must now provide specific timelines when they plan to put in place measures to protect the safety and soundness of our financial system, our institutions, our savings and our communities. There are agencies, including the Securities and Exchange Commission and the Department of Labor, that are acting quickly. Others need to match that level of leadership more rapidly.”