Washington, D.C. — Today the Commodity Futures Trading Commission (CFTC) Climate Risk Subcommittee released a new report, “Managing Climate Risk in the U.S. Financial System.” The report marks the first time a regulatory organization has acknowledged the risk that climate change poses to the financial system, investor protection, and individual financial institutions. Following the release of the report, Andy Green, managing director of Economic Policy at the Center for American Progress, issued the following statement:
The evidence is undeniable: The U.S. financial system and the U.S. economy cannot avoid sweeping negative impacts from climate change. As this landmark report notes, unmanaged climate change will affect virtually every aspect of the financial system, from banks and insurance companies to individual investors and consumers. As we know from 2008, a financial crisis will imperil taxpayers and jobs. The scope for catastrophe is magnified enormously by a financial crisis caused by climate shock. This risk is not a future risk—it is already here.
There is a clear need for federal and state financial regulators to act quickly and, in particular, to address the climate crisis at its core. Regulators should measure and require the disclosure of financed emissions and conduct stress tests and scenario analyses of financial institutions and investment portfolios. Firms should be required to hold higher loss-absorbing capital to mitigate risks and force themselves to internalize their negative impacts on the economy and the planet. Investors and consumers, and their retirement savings fiduciaries, will also need new information and new protections.
Up until now, the United States has trailed behind other countries in acknowledging climate risks and enacting these reforms. Although it is only a first step, this report should serve as a clarion call to action.
- “Climate Change Threatens the Stability of the Financial System” by Gregg Gelzinis and Graham Steele
- “Financial Markets and Regulators Are Still in the Dark on Climate Change” by Andy Green, Gregg Gelzinis, and Alexandra Thornton
- “Corporate Long-Termism, Transparency, and the Public Interest” by Andy Green and Andrew Schwartz
- “A 100 Percent Clean Future” by John Podesta, Christy Goldfuss, Trevor Higgins, Bidisha Bhattacharyya, Alan Yu, and Kristina Costa
For more information on this topic or to speak with an expert, please contact Julia Cusick at gro.ssergorpnacirema@kcisucj.