WASHINGTON, D.C. — Public Citizen and Americans for Financial Reform (AFR) released detailed policy recommendations today to the U.S. Department of the Treasury for its forthcoming report on climate-related financial risk. The groups called for “clear expectations, concrete milestones, and explicit timelines for each member agency.”
While Treasury has taken important first steps in gathering data and building its capacity, the report must mark a transition to calling for concrete, timely, and bold action by all financial regulators, the groups said. The recommendations include both specific policies that regulators should immediately implement and a broader range of options that the report should endorse for consideration.
“The administration’s policy is to mitigate both climate-related financial risk and its drivers,” said David Arkush, director of Public Citizen’s climate program. “To meet this charge, the report must acknowledge that fossil fuel finance is a primary driver of systemic climate risk and that our financial system today is completely misaligned to this reality and on a collision course with the administration’s climate agenda. U.S. banks lead the world in financing new fossil fuel development, and insurers and markets continue to misprice physical risk. The Treasury report must show its understanding of this threat by adopting a precautionary approach that calls on regulators to intervene before risks overflow and trigger a new financial crisis.”
“The climate crisis poses severe and urgent threats to the financial system,” said Alex Martin, senior policy analyst at Americans for Financial Reform. “To deal with such a threat, the Treasury report must call for both immediate interventions, like issuing supervisory guidance and stress tests, and endorsing consideration of the full range of regulatory authorities, like capital requirements and concentration limits for climate risk. That’s how this report can create a meaningful roadmap for tackling climate threats that are broader and deeper than those in the 2008 financial crisis. The report also must treat climate-related financial risk as inseparable from the administration’s commitments on racial and environmental justice, and address decades of environmental racism and discrimination that have left marginalized communities more vulnerable to climate harms.”
The public release of the detailed recommendations follows a letter by Public Citizen, AFR, and 37 NGO’s to Treasury Secretary Janet Yellen calling for a strong report, as well as a letter from Public Citizen, AFR, and four other groups calling on banking regulators to immediately issue supervisory guidance. In March, Public Citizen and AFR published a detailed “Roadmap for U.S. Climate Financial Regulation,” upon which these recommendations are based.
A May executive order by President Joe Biden directed Treasury to lead the Financial Stability Oversight Council (FSOC) in issuing a report that considers how “climate-related financial risk can be mitigated, including through new or revised regulatory standards as appropriate.” Treasury is expected to release its report at the Oct. 18 FSOC meeting.