Casten Applauds Federal Regulators for Crucial First Steps to Mitigate Climate-related Financial Risk
Washington, D.C. – U.S. Congressman Sean Casten (D-IL) issued the following statement on the heels of a series of announcements from the U.S. Department of Treasury, Federal Reserve, Commodities Futures Trading Commission (CFTC), and U.S. Securities and Exchange Commission (SEC) on new climate-risk procedures and resources, signaling intensified focus on threats to the financial system posed by climate change.
Casten said, "Just because we're in the middle of one economic crisis doesn't mean we can afford to ignore the next one. As someone who's been fighting tirelessly for climate risk action since I've been in Congress, I've been pleased to see federal regulators like Treasury Secretary Yellen and Governor Brainard at the Federal Reserve follow in the footsteps of Commissioner Behnam at CFTC and Acting Chair Allison Herren Lee at the SEC in recognizing the imminent threat climate change poses to our financial system. While these new climate-risk focused priorities will equip agencies with a more comprehensive understanding of the problem and pave the way for concrete regulatory action, much more must be done.
"As we remember from 2008, financial crises have far reaching consequences. To protect our financial system and prevent economic catastrophe, Federal Regulators and Congress must work together to respond to the rapidly accelerating threat of climate change," continued Rep. Casten. "I'm proud to have introduced the Addressing Climate Financial Risk Act with Senator Feinstein this Congress to ensure federal financial regulators take concrete action to mitigate the threat of climate risks to our financial system. The right time to safeguard our financial system against climate change was a decade ago, but our last chance is now."
On Tuesday, Governor Brainard announced the Federal Reserve is establishing a Financial Stability Climate Committee (FSCC) designed to take a macroprudential approach to assess the climate risk impact on financial stability, which will complement the work of the Supervision Climate Committee (SCC). Wednesday, Treasury Secretary Janet Yellen announced that as Chair of the Financial Stability Oversight Council (FSOC) her first FSOC meeting on March 31st will focus on risks posed by climate change, following her February statement indicating that she sees climate change as part of the broader mandate for Treasury and other Federal Agencies. Last week, the Commodities Futures Trading Commission (CFTC) established a new Climate Risk Unit, following their 2020 Report that unequivocally stated climate change poses a major risk to the stability of the U.S. Financial system and to its ability to sustain the American economy.
Casten has been leading the charge underscoring the financial risks around climate since coming to Congress. In May 2020, he led 41 House colleagues in a letter urging the Federal Reserve to Join the Network For Greening the Financial System, which was originally established by eight central banks in December 2017 to meet the goals set forward in the Paris agreement and acknowledge that climate-related risks are a source of financial risk. The Federal Reserve announced they'd be joining in December 2020.
In February, Casten questioned Chairman Powell on climate risk in the Financial Services Hearing on the U.S. economy, where he referenced Secretary Yellen's recent statement confirming that the Fed has a mandate to ensure financial institutions manage and understand all of the risks they face, including climate risk.
Casten and U.S. Senator Feinstein (D-CA) recently introduced the Addressing Climate Financial Risk Act, new legislation to improve the ability of federal regulators to understand and mitigate risks from climate change within the financial system. A broad coalition for financial organizations have expressed their support for the legislation.
Last Congress Casten and U.S. Senator Elizabeth Warren (D-Mass.) introduced H.R. 3623 the Climate Risk Disclosure Act of 2019 to require public companies to disclose critical information about their exposure to climate-related risks. The legislation would help investors appropriately assess climate-related risks, accelerate the transition from fossil fuels to cleaner, and more efficient energy sources, and reduce the risks of both environmental and financial catastrophe. The bill passed out of the House Financial Services Committee in July of 2019 and was recently included in the Climate Leadership and Environmental Action for our Nation's (CLEAN) Future Act, ambitious new climate legislation introduced by Energy and Commerce Committee Chairmen to ensure the United States achieves net zero greenhouse gas pollution.
Last Congress Casten and U.S. Senator Brian Schatz (D-HI), introduced the Climate Change Financial Risk Act of 2019 to direct the Federal Reserve to conduct stress tests on large financial institutions to measure their resilience to climate-related financial risks.