Government Regulators Make Progress in Addressing Climate-Related Risks

A brand-new scorecard, researched and released by Ceres, shows that federal financial regulators are taking numerous and broad steps to tackle the financial risks of climate change, as outlined by the Biden Administration, in a “clear sign” of regulatory process on the issue. 

The report provides a in depth analysis of the some 230 actions taken since April 2021 to protect capital markets, financial institutions, and communities from the effects of climate risks. 

Among the agencies that scored highly for the report were the Federal Reserve Bank (The Fed), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), the U.S. Securities and Exchange Commission (SEC), the Municipal Securities Rulemaking Board (MSRB), the Commodity Futures Trading Commission (CFTC), the Federal Housing Finance Agency (FHFA), and the U.S. Department of the Treasury. 

"The scorecard is designed to both highlight the hard work federal agencies are doing to address climate-related financial risk and draw attention to the areas that need work," said Steven M. Rothstein, Managing Director of the Ceres Accelerator for Sustainable Capital Markets at Ceres. "The goal of these agencies is to ensure the safety and soundness of our financial system. They have identified climate change as a significant financial risk and are working to protect all sectors of our economy from its impacts." 

The U.S. Department of the Treasury’s Financial Stability Oversight Committee (FSOC) is a group tasked with identifying risks and responding to emerging threats to financial stability of the economy, first identified climate change as an “emerging threat” to the economy in October 2021. 

Key findings include:  

• All nine agencies have publicly affirmed climate as a systemic risk to the financial system. 
• All nine agencies have made progress in identifying the data needed to evaluate these risks and develop a plan to procure data they need. 
• For those agencies with authority that encompasses the needs of financially vulnerable communities, there is greater variation in progress. 
• Each agency has designated staff to focus on climate-related risks, with all but one appointing senior staff to lead those teams. 
• Several agencies have begun to incorporate climate risk into their supervisory activities.