Confronting Climate Financial Risk Will Take a ‘Whole of Government’ Approach

WASHINGTON, D.C. – The White House today released a roadmap for a “whole of government” response to climate-related financial risk, thanks to the leadership of National Economic Council Director Brian Deese and National Climate Advisor Gina McCarthy. The report clearly states that the climate crisis poses systemic threats to the financial system. And it embraces a “precautionary approach” as a general framework for responding to those risks, holding that we must urgently invest in decarbonization and regulators must take action well before they have perfect information.

The roadmap does not identify how financial regulators should address climate-related risks. Those details are expected next week in a report written by U.S. Treasury Secretary and Chair of the Financial Stability Oversight Council (FSOC) Janet Yellen, in consultation with other FSOC regulators. At the same time, the White House is considering whether to renominate Jerome Powell as chair of the Federal Reserve, one of the most significant FSOC members. Powell has been criticized for deregulating Wall Street and failing to act on climate. David Arkush, director of Public Citizen’s climate program, issued the following statement:

“This report provides excellent framing for how financial regulators should respond to climate-related risk. It explains how the climate crisis is destabilizing the financial system and identifies the right approach for regulators to take – a precautionary principle.

“Now we need Treasury and FSOC to issue an action plan that embraces this framework. That means taking concrete steps to integrate climate-related risk into bank supervision and start curbing Wall Street’s reckless fossil-fuel financing. The White House clearly gets it. Next week, we’ll learn whether Yellen and Powell get it.”