INSIGHT by Ceres
Report finds climate change poses a major financial risk to U.S. economy, calls on financial regulators to incorporate climate-related risk into supervision
| A subcommittee of the U.S. Commodity Futures Trading Commission’s (CFTC) Market Risk Advisory Committee issued its first-ever climate risk report today, “underscoring how serious a systemic financial threat climate change poses to U.S capital markets, and how concerned stakeholders from across the political spectrum are about it,” said Mindy Lubber, Ceres’ CEO and President and a member of the CFTC subcommittee. Lubber is also a former regulator, having served as a regional administrator for the U.S. Environmental Protection Agency under the Clinton administration.
The report, Managing Climate Risk in the U.S. Financial System, was produced by the Climate-Related Market Risk Subcommittee, a nonpartisan, cross-sectoral group of members advising the CTFC, an agency to the federal government whose mission is to “promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation.” It recommends that financial regulators “incorporate climate-related risk into their mandates and develop a strategy for integrating these risks in their work, including into their existing monitoring and oversight functions.” It makes a series of recommendations to be implemented by a broad array of financial regulatory agencies, and calls for a price on carbon pollution.
“For a politically and sectorally diverse group of influential members advising the Trump administration to issue such a strong call for regulatory action is testament to just how important a financial issue climate change is, and to just how urgently we need leadership now,” Lubber added. “At Ceres, we are committed to driving and accelerating transformative change within U.S. financial regulatory agencies through the Ceres Accelerator for Sustainable Capital Markets. I look forward to working with the CFTC and other agencies to make sure they quickly implement these bold recommendations and protect our capital markets from the systemic threats of climate change.”
The release of the report follows a recent surge of alarm bells sounded by major capital market leaders regarding the urgent need to regulate climate change as a systemic financial risk. In June, the Ceres Accelerator for Sustainable Capital Markets issued a report, Addressing Climate Change as a Systemic Financial Risk: A Call to Action for U.S. Regulators, recommending more than 50 specific actions financial regulators should take to incorporate climate change across their mandates. California Insurance Commissioner Ricardo Lara adopted one of those recommendations shortly after the report’s release, creating a database of insurance products that help to reduce emissions or increase climate resiliency.
In July, investors with nearly $1 trillion in assets under management joined with a bipartisan collection of former members of Congress, former regulators, heads on companies, philanthropic foundations, and advocacy organizations to urge the heads of the Federal Reserve, the Securities and Exchange Commission, and other U.S. financial regulatory agencies to act on climate change as a systemic financial risk, and to consider implementing the recommendations of Ceres’ report. California Comptroller Betty T. Yee, a Ceres board member, also called on financial regulators to act on climate change in an op-ed published in Barron’s Magazine.
In August, the U.S. Senate released The Case for Climate Action: Building a Clean Economy for the American People, showcasing the economic impacts of climate change. The Democratic Treasurers Association sent a letter to SEC Chairman Jay Clayton, urging his office to tackle climate change as a systemic risk, as did Senator Elizabeth Warren – D, Mass.
Ceres is a sustainability nonprofit organization working with the most influential investors and companies to build leadership and drive solutions throughout the economy. For more information, visit ceres.org and follow @CeresNews.