March 12, 2021

Bill to Reduce Climate Change Risk in Financial System Draws Broad Support

Washington—A coalition of financial organizations announced their support for the Addressing Climate Financial Risk Act, a bill introduced by Congressman Sean Casten (D-IL) and Senator Dianne Feinstein (D-Calif.) to improve the ability of federal regulators to understand and mitigate risks from climate change within the financial system.

The bill is supported by the following groups:

  • Ceres
  • National Association for Latino Community Asset Builders
  • National Conference on Public Employee Retirement Systems
  • National Whistleblowers Center
  • Public Citizen
  • Sierra Club
  • Union of Concerned Scientists
  • UN Principles for Responsible Investment
  • California Public Employees' Retirement System
  • California State Teachers' Retirement System
  • New York State Common Retirement Fund
  • Edison International
  • PG&E Corporation
  • Sempra Energy

"Just because we're in the middle of one economic crisis doesn't mean we can afford to ignore the next one," said Representative Casten. "As we learned from 2008, financial crises have far ranging consequences. It is imperative that Federal financial regulators assess the risk and plan to combat it. The right time to safeguard our financial system against rapidly accelerating climate risk was yesterday. Our last chance is now."

"Our bill draws broad support because it's becoming increasingly clear that climate change poses a serious threat to our financial system," said Senator Feinstein. "Reducing our carbon emissions is the best way to reducing that threat, but as we work toward that goal we must also prepare for the financial strain created by climate change. I look forward to working with this coalition, and other organizations that join our effort, to convince my colleagues to pass this important bill. The cost of doing nothing is too high."

Climate change is increasing the frequency and severity of wildfires, flooding, droughts and other natural disasters and extreme weather events. The damage and risk generated by these events – in addition to changes needed to transition to a cleaner economy – threaten to severely disrupt real estate values in high-risk areas, dramatically change whole sectors of the economy and make insuring against risk increasingly unaffordable. These trends, in turn, threaten the stability of the U.S. financial system, which is why it is so important to ensure financial regulators approach them in a comprehensive way.

"This is an urgent, all hands on deck moment," said Steven M. Rothstein, managing director of the Ceres Accelerator for Sustainable Capital Markets. "U.S. financial regulators must immediately address the systemic risk climate change poses to our financial system and take up the reigns of global leadership. This critical legislation enables that leadership while keeping our economy and our people out of harm's way."

"Climate change poses a systemic risk to the financial system and the economy, and it's long past time for U.S. financial regulators to take strong action to manage and mitigate climate risks," said Ben Cushing, financial advocacy campaign manager at the Sierra Club. "This critical legislation aims to bolster financial regulators' ability to address climate risks and is an important step in the right direction. We also expect to see the Biden administration continue to use its authority to act boldly and urgently to tackle the climate crisis, including through financial regulation."

"U.S. financial regulators have failed to use their powers to protect the economy from the financial system's continued funding of the climate crisis," said David Arkush, director of Public Citizen's Climate Program. "This bill requires common sense measures that the regulators should already be taking. It marks an important first step in managing the dangers that climate risk poses to the financial system and the economy."

"Senator Feinstein and Representative Casten's bill is a first step in addressing the systemic risks climate change poses to the global economy," said Nicole Pinko, corporate analyst and engagement specialist, Climate & Energy Program at the Union of Concerned Scientists. "To create an equitable and just transition to a low-carbon economy that works for everyone, we must ensure that climate-related financial risks are addressed across the US financial system."

"The legislation is a reasonable, results oriented approach to the real threat of climate change" said Hank Kim, executive director and counsel of NCPERS. "NCPERS members are long-term investors whose investment horizon is 30 or more years. As such, we see the dangers & risks of climate change clearly. The United State, in partnership with all nations, need to begin addressing this crisis with urgency.

"Investors need federal regulators to provide clear guidance to understand the climate risks to the financial system and potential economic opportunities," Marcie Frost, CEO of CalPERS. "Our ability to invest wisely and pay retirement benefits over decades depends on it. That's why Senator Feinstein and Representative Casten's bill is so important. It gives authorities a powerful tool that will help protect investors like CalPERS from climate risks that threaten our portfolio companies and the long-term sustainability of our fund."

"For several years, major investors, like New York state's pension fund, have been taking steps to protect our portfolios from climate risk, one of the greatest threats to our long-term value," said New York State Comptroller Thomas P. DiNapoli. "We need to ensure our nation is prepared to meet the risks climate change poses throughout our financial system, and we thank Senator Feinstein and Representative Casten for their leadership on this important issue."

"Edison International supports the Addressing Climate Financial Risk Act of 2021, as it reinforces the need to address systemic risks posed by climate change to U.S. financial markets," said Pedro J. Pizarro, president and CEO of Edison International. "We view the bill as encouraging ESG disclosure practices that are critical to appropriately pricing financial risk related to climate change."

"PG&E commends the leadership of Senator Feinstein and Congressman Casten in their introduction of the Addressing Climate Financial Risk Act of 2021," said Patricia K. Poppe, CEO of PG&E Corporation. "Meeting the challenge of climate change – both mitigating and adapting to its impacts – is central to PG&E's long-term vision and requires strong public policy, partnerships, and availability of data to help inform decision-making. The legislation would increase that availability of data and understanding on climate risk, and provide recommendations on how to incorporate climate risks into our decision frameworks."

"San Diego Gas and Electric believes transparency and information are essential to addressing climate change risks, and we applaud Senator Feinstein and Representative Casten's forethought as we continue our efforts to equitably build safer, cleaner and stronger communities particularly for people of color and lower-income populations," said Caroline Winn, CEO of SDG&E.

Provisions of the Addressing Climate Financial Risk Act:

  1. Establish an advisory committee on climate financial risk: The bill would establish a permanent committee on the Financial Stability Oversight Council (FSOC) made up of experts in climate science, climate economics and climate financial risk. The committee would advise FSOC, including in producing a report that would include recommendations on how to improve the ability of the U.S. financial regulatory system to identify and mitigate climate risk.
  2. Update supervisory guidance on climate risk: The bill would require federal bank and credit union regulatory agencies to update their supervisory guidance to include climate risk and to develop a strategy to identify and mitigate climate financial risk.
  3. Update non-bank designation guidance: The bill would require FSOC to specify how it will incorporate climate risk into its decisions about whether to designate risky non-bank financial institutions as requiring additional oversight by the Federal Reserve.
  4. Require a Federal Insurance Office (FIO) report on insurance regulation and climate risk: The insurance industry is more directly affected by climate risk than other areas of the financial system. This provision would require the FIO to produce a report on how to modernize and improve climate risk insurance regulation in the United States. The report would be modeled on FIO's 2013 report on modernizing state insurance regulation.
  5. Improve global coordination: Climate change is a global problem that requires international coordination. This provision would provide a sense of Congress that U.S. financial regulators should join the Network for Greening the Financial System, formally join the Basel Committee's Task Force on Climate-Related Risk and work with international regulators on climate financial risk to the extent possible.

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