A top U.S. financial coordinating organization took several steps on Thursday to manage the growing risks that climate change poses to the U.S. financial system.
Why it matters: While the Biden administration has been taking an all-of-government approach to climate change, like factoring climate risk into planning at the Treasury Department, today's moves by the politically independent Financial Stability Oversight Council (FSOC) carry significant weight.
- The FSOC grew out of the 2008 financial crisis and is a coordinating body that is aimed at preventing financial shocks that lead to broader, systemic risks.
The big picture: The top-level conclusion of the report is that the FSOC, headed by Treasury Secretary Janet Yellen, "[v]iews climate-related financial risks as an emerging threat to the financial stability of the United States."
- This is due to the disruptions that could occur while transitioning away from a fossil fuel-intensive energy system as well as physical damage from extreme weather events, sea level rise and other impacts of climate change.
Details: The Council will form two committees to help financial regulators better understand climate change-related risks to the financial system by bringing in experts from environmental organizations, climate scientists from federal agencies, and others. ...
- One will be the first formal committee created by the council in a decade, according to a senior Treasury Department official. The other committee will be the first-ever advisory committee created by the FSOC, they said.
- The report aims to ensure regulators have a better idea of climate change-related risks to the entities in their purview, such as banks and insurance companies.
- The FSOC