September 10, 2020

Casten Climate Priorities Included in the CFTC Market Risk Advisory Committee Report

Downers Grove, IL – U.S. Representative Sean Casten (IL-06) applauded the release of the Commodity Futures Trading Commission (CFTC) Climate-Related Market Risk Advisory report entitled ‘Managing Climate Risk in the Financial System', which included polices from two Casten-led bills, H.R. 3623, the Climate Risk Disclosure Act and H.R. 5194, the Climate Change Financial Risk Act. The Climate Subcommittee voted unanimously 34-0 to adopt the report.

In May, Casten submitted a comment letter to the CFTC Climate-Related Market Risk Subcommittee Chair Robert Litterman urging the subcommittee to include Casten's policies. The full letter can be found here.

Casten said, "Climate change is a serious risk to the financial system. Through rising sea levels, increasingly frequent extreme weather, worsening water shortages, growing resource scarcity, and its many other effects, climate change directly threatens valuable assets. It is also changing long-term climate patterns in ways that will lower labor productivity, devalue and destroy fixed assets, stress agricultural yields, and ultimately affect every sector of our economy. We must tackle these issues head-on not only to protect our environment but to improve and expand our economy. I'm pleased that the CFTC report made this risk clear and took policies into consideration to help the market appropriately assess the risk of climate change."

Specifically, the CFTC report recommends that regulators require firms to disclose ‘material climate risks', and recommends that regulators require public companies to disclose all greenhouse gas emissions. There are also recommendations similar to the Climate Change Financial Risk Act, recommending that bank and nonbank financial firms be required to address climate-related financial risks via their existing risk management frameworks, including embedding climate risk monitoring into governance frameworks. Finally, the report calls for regulators to pilot climate risk stress testing.

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.

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 (Fed) to conduct stress tests on large financial institutions to measure their resilience to climate-related financial risks.