WASHINGTON, D.C. — In a letter signed by nine consumer advocacy, environmental, and social justice groups and a petition signed by over 60,000 people, advocates today called on the Federal Reserve Board of Governors to issue principles for managing climate-related financial risk for the large banks under its supervision.
“The Fed has a responsibility to ensure banks address the climate-related financial risks they face, and this position has been repeatedly affirmed by top Fed officials,” said the groups in their letter to the Federal Reserve Board of Governors. “It is imperative that the Fed provide institutions with the guidance they need to firmly understand and address their climate-related financial risks and explain how the Fed intends to incorporate these risks into its examinations.”
The letter was signed by Amazon Watch, Americans for Financial Reform, Center for American Progress, E3G, The Greenlining Institute, Public Citizen, Sierra Club, U.S. Pirg, and 350.org.
In addition to the letter, a petition, circulated by Americans for Financial Reform Education Fund, Climate Hawks Vote, Positive Money, Public Citizen, Sierra Club, Stop the Money Pipeline, U.S. PIRG, and 350.org, called on the Federal Reserve to issue climate supervisory principles that would advise banks to:
- Take a whole-of-business approach to mitigating climate risk;
- Consider appropriate time horizons for assessing and addressing climate risk;
- Conduct robust climate scenario analysis and review results with bank supervisors;
- Align internal strategies with their public climate commitments, both of which should be guided by science-based metrics and targets;
- Respect Indigenous rights and ensure the projects and companies they fund uphold Free, Prior, and Informed Consent and tribal sovereignty; and
- Recognize where and how risk-management measures could have adverse effects on low-income and marginalized households and communities, and take steps to understand and fully mitigate these risks.
“Climate-related financial risks to banks’ safety and soundness are well-documented and accelerating,” states the petition. “These risks include the physical impacts of climate change on communities, households, and businesses and the transition risks that arise as society reorients toward a clean energy economy. The Fed has a mandate and responsibility to address climate-related financial risks to banks.”
In December 2021, the Office of the Comptroller of the Currency issued guidelines laying out how climate-related financial risks should be handled by banks with more than $100 billion in total consolidated assets. Several months later, the Federal Deposit Insurance Corporation issued a draft high-level framework for the safe and sound management of exposures to climate-related financial risk.