Climate change — already a well-known threat to our weather patterns, infrastructure, electric grids, health and safety — also presents a profound and growing threat to our financial system. Public and private sector economic experts must — and increasingly are starting to — take steps to protect against that threat, including at the highest levels of the federal government.
In two significant actions just last week, the Commodity Futures Trading Commission (CFTC) announced it will establish a new Climate Risk Unit, and the Securities and Exchange Commission (SEC) requested public input about how it should require climate change consideration under its existing responsibility to mandate risk disclosure from publicly traded companies.
Other recent actions by financial regulators abound. This week, the Federal Reserve announced the creation of a Financial Stability Climate Committee to focus on climate risk to the financial system itself. That will complement the Fed’s earlier announced Supervision Climate Committee, which is focused on the resilience of specific firms to the risks of climate change. The Department of the Treasury (USTD) has also signaled that it will add capacity and expertise on climate change, a commitment that Treasury Secretary Janet Yellen made during her confirmation hearing. More generally, a Jan. 27 executive order directs all government agencies to “drive assessment, disclosure, and mitigation of climate pollution and climate-related risk in every sector of our economy.”