A group of 20 US lawmakers criticized American financial regulators for falling behind on addressing climate change risks and potentially thwarting efforts to make climate risk a main focus of global financial rules.
“The United States’ lack of progress and innovation in establishing robust measures to address the financial and economic risks from climate change places us behind our international peers and is counterproductive to American interests,” the Democratic and independent lawmakers said in a letter written to the chairs of the Federal Reserve, Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC).
The Fed’s recent climate stress test showed that the six largest US banks face significant challenges in predicting the impact of climate change on their loan portfolios, which casts “serious doubt on the preparedness of our banks and financial systems for climate-related financial risks”.
The group, led by Senator Elizabeth Warren and Representative Sean Casten, also raised concerns about reports that the regulators have blocked the Basel Committee on Banking Supervision plans to focus more on climate risk under global financial rules. While European central banks have been pushing for Basel to require banks to disclose how climate change impacts their business, US officials cited concerns that the watchdog was overstepping, Bloomberg first reported.
“The United States’ lack of progress and innovation in establishing robust measures to address the financial and economic risks from climate change places us behind our international peers.”
The reports echo Republican lawmakers’ pushback on the US Securities and Exchange Commission’s climate disclosure rules, which have been put on hold due to several lawsuits.
Still, “nearly every other global financial supervisor agrees that climate-related risks present safety and soundness risks to individual institutions and systemic risk to the financial sector”, and US regulators need to do more, the letter stated.
“Indeed, climate’s systemic risk is squarely within the Fed’s dual mandate of limiting inflation and maximizing employment,” the lawmakers wrote.
The letter asked the regulators to respond to a series of questions by 28 June about how they plan to address climate-related financial risks, including improving data access for banks, clarification of their position on the Basel committee’s Task Force on Climate-related Financial Risks, and if they’ve attempted to weaken the Basel committee’s work on climate.
The OCC and the FDIC declined to comment while a spokesperson for the Fed said the central bank planned to respond to the letter.
