Public Citizen Provides Regulators Road Map to Address Climate Risks in Financial and Commodity Markets

Public Citizen Offers Seven Recommendations to CFTC Climate Subcommittee

WASHINGTON, D.C. – The U.S. Commodity Futures Trading Commission (CFTC) can mitigate risks related to the climate crisis by following Public Citizen’s seven-point reform plan, including adjusting capital and margin requirements, establishing a new climate risk division, initiating an interagency climate working group and taking other actions, Public Citizen said today in comments to the agency. The CFTC could take the actions using its existing authority.

Tyson Slocum, director of Public Citizen’s Energy Program, and David Arkush, managing director of Public Citizen’s Climate Program, submitted the comments to CFTC Commissioner Rostin Behnam, who sponsors the commission’s Market Risk Advisory Committee. The CFTC established a Climate-Related Market Risk Subcommittee last year to address the growing threat of climate change to commodity and derivative markets.

“Our seven recommendations would establish the CFTC as a leader in confronting climate change and ensuring markets are shielded from undue risk,” said Slocum, a member of the Market Risk Advisory Committee. “The leveraged nature of commodity derivative trading and vulnerability to banks and industry entities, both acutely expose such markets to significant systemic risk. We’ve provided the path for the commission to act – and act quickly.”

The subcommittee’s efforts to minimize disruption from the climate crisis to U.S. commodities markets stands in striking contrast to the inaction and denial of the Trump administration. Under President Donald Trump, climate concerns have largely been brushed aside in favor of industry interests. The CFTC’s creation of the climate-related subcommittee in 2019 demonstrated that the commission understands that climate change poses grave long-term danger to markets and the U.S. economy.

“At a time when much of the federal government not only is failing to address the climate crisis but working to exacerbate it, it is a hopeful sign that the CFTC is discussing how to address the issue,” Arkush said. “But its action here, requesting input on topics for an advisory committee to consider, is only a small, first step. The CFTC is charged with protecting commodity market users and the public. It must take seriously the task of responding to the climate crisis, the greatest threat to both markets and the public, and take meaningful steps like the ones we’re suggesting.”

The seven recommendations are:

  1. Adjust capital and margin requirements to properly reflect climate risks;
  2. Create a climate risk division;
  3. Join the network for greening the financial system, a coalition of financial regulators dedicated to tackling climate change;
  4. Initiate a climate risk working group with the Federal Reserve, the U.S. Department of the Treasury, the U.S. Securities and Exchange Commission and the Financial Stability Oversight Council;
  5. Incorporate climate risks into supervisory stress tests;
  6. Encourage jurisdictional entities to disclose climate risks; and
  7. Expand subcommittee membership to include more diverse voices, including people from academia, environmental groups and other public interest sectors.

Read the complete recommendations.