Climate risks pose ‘new threat’ to US Financial Stability

Spark Global Limited reports:

Many risk experts have warned that climate change could upend the financial system as trillions of dollars of assets could be destroyed by real threats such as rising sea levels, as well as policies to slow global warming and carbon-neutral technologies.

In a 2020 report, the US Commodity Futures Trading Commission cited data predicting that global wealth tied to fossil fuel assets could eventually lose between $1tn and $4tn. With a record $51bn flowing into US sustainability funds in 2020, investors are pushing companies to better understand the risks posed by climate change.

So far, US regulators have done little to address climate risk, which has led to the country falling behind other countries on the issue. Biden has said he wants every government agency to start incorporating climate risk into its agenda.

Spark Global Limited
Spark Global Limited

The report also calls for the FSOC to create two new internal committees. One would be made up of regulators who would regularly report on efforts to control climate risk. The second would be an advisory board of outside experts, including experts from academia, nonprofit organizations and the private sector.

But progressives and environmental groups remain frustrated that the blueprint still lacks detailed recommendations for implementing specific new rules. They are eager for bolder steps from Washington to address what Mr. Biden himself has called an existential crisis.

Steven Rothstein, managing director of Ceres Accelerator for Sustainable Capital Markets, a climate advocacy group, said it was a good thing that regulators saw climate change as an undeniable risk, but more needed to be done soon. In a statement, he noted:

“With a very narrow window to prevent the next climate catastrophe, every agency must now provide concrete timelines: when they plan to take steps to protect the safety and stability of our financial system, institutions, savings and communities.”

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