Casten Applauds NY State Financial Regulator for Directing Banks to Manage and Disclose Climate-Related Financial Risk

October 29, 2020
Press Release

Downers Grove, IL – U.S. Representative Sean Casten (IL-06) applauded the New York State Department of Financial Services for directing banking institutions in its jurisdiction to begin incorporating climate-related financial risks into their governance frameworks, risk management processes, and business strategies as well as developing climate-related financial risk disclosure. Rep. Casten, a former clean energy entrepreneur,  has introduced two bills that would accomplish these goals at the Federal level.

Recognizing the systemic risk that climate change poses to the broader financial system, Superintendent Lacewell wrote that the "Adverse physical impacts of a weather event in one community may not necessarily be contained in that community, and losses at one financial institution may not be confined to that institution and may ricochet across the financial system, as correlated risks from these events could have an effect that may reach beyond an individual organization to the broader financial system and the economy."

Casten said, "I commend the New York State Department of Financial Services for taking steps to bring the U.S. closer to its international counterparts in attempting to quantify and manage the systemic financial risks posed by climate change. The impacts of climate change on the financial sector are broad and non-linear. For every one degree Celsius increase, it is estimated that the damage to the U.S. economy is about 1.2% of gross domestic product. And if we do nothing to address the underlying climate crisis, we can expect that number to grow exponentially. I call on the Federal Reserve and the Securities and Exchange Commission to recognize the importance of climate-related financial risk and to take action to protect investors and the financial system."

Casten and U.S. Senator Elizabeth Warren (D-Mass.) introduced H.R. 3623 the Climate Risk Disclosure Act of 2019 that would require publicly traded companies to disclose their exposure to climate-related risks. The legislation would allow investors to appropriately assess climate-related risks to direct their investments, 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.

In November, Casten and U.S. Senator Brian Schatz (D-HI), introduced the Climate Change Financial Risk Act of 2019. The legislation would direct the Federal Reserve to conduct stress tests on large financial institutions to measure their resilience to climate-related financial risks.