Treasury’s Climate Report Light on Specifics, Regulators Must Go Much Farther, Faster

WASHINGTON, D.C. — The U.S. Treasury Department released its climate finance report on Thursday evening following a meeting of the Financial Stability Oversight Council (FSOC) where members voted to approve the report. Though strong in some areas like climate risk disclosure and scenario analysis, the report largely highlights agency actions that are already underway, and it fails to lay out a comprehensive roadmap with specific recommendations and timelines for regulators to consider beyond the assessment and disclosure of climate risk, Americans for Financial Reform (AFR) and Public Citizen said. 

“The Treasury report provides a strong analysis of the significant threat that climate change poses to financial stability, as well as an examination of initial efforts needed on climate risk assessment, disclosure, and information sharing,” said Alex Martin, Sr. policy analyst for Americans for Financial Reform. “Unfortunately, it largely avoids laying out specific policy recommendations for U.S. regulators to catch up and surpass our international peers in mitigating climate risk — an urgent task needed to protect the financial system. Future activities of the FSOC must look comprehensively across financial regulators and recommend further actions to mitigate systemic risk. While a few regulators such as the U.S. Securities and Exchange Commission (SEC) are moving effectively in the right direction, there are also clear laggards like the Federal Reserve, and this must change. Each of the regulators needs to move quickly to implement these basic recommendations on assessment, disclosure, and scenario analysis, and take further regulatory steps with teeth that can truly rein in risky finance.” 

“This report is an important, unprecedented step, and it sends a strong signal to Wall Street that U.S. financial regulators are getting serious about climate risk,” said David Arkush, director of Public Citizen’s climate program. “At the same time, it includes only the bare-minimum first steps—ones that should have been taken long ago. One of the report’s final recommendations [number 4.7] is that regulators should review existing rules and guidance to consider whether they need to do more. That’s what this report should have done. We need much stronger leadership from the White House and Treasury if we’re going to avoid a climate-based financial crisis.” 

This report 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.

In the lead up to Treasury’s report release, Public Citizen and AFR released detailed policy recommendations and called for the report to include “clear expectations, concrete milestones, and explicit timelines for each member agency.” The Treasury report falls short.