Financial institutions

Treasury Department Report on 21st Century Financial Institutions

WASHINGTON (October 22, 2021) – Following a review of federal banking practices, the Financial Stability Oversight Council (FSOC) yesterday released its recommendations on how regulators can ensure the financial system is properly prepared for the impending onslaught of climate change impacts. The report, which was mandated by a May 2021 White House executive order, was led by Treasury Secretary Janet Yellen and her department.

Below is a statement from Dr Rachel Cleetus, Policy Director of the Climate and Energy Program at the Union of Concerned Scientists (UCS).

“The Treasury Department report is an important first step in recognizing the growing risks of climate change to our financial system. However, additional steps are needed to implement widespread transformational change in the U.S. financial sector to accommodate rapidly worsening climate impacts and the urgent need to move toward a net zero economy.

“Science is clear that the accelerated warming of our planet is mainly due to the burning of fossil fuels. Oil, gas and coal companies have designed and funded deliberate campaigns to spread misinformation about the harm their products cause and delay climate action. At the same time, none of their business activities would have been possible without the continued support of banks and asset managers. The FSOC’s recommendation for better climate risk disclosure can help ensure transparency of corporate fossil fuel investments, but without assertive disincentives to cut funding for fossil fuel projects, policymakers are leaving taxpayers and investors behind. responsible for the inevitable financial fallout. These fallouts will be most costly for communities of color and low- and fixed-income households, which tend to be disproportionately affected by financial crises and are among the most vulnerable to climate impacts.

“The bottom line is that we need to shift radically away from fossil fuels in this decade if we are to have any chance of meeting our climate goals, and financial regulators must play their part in ensuring this. fossil fuel projects, our financial institutions will remain stuck with a 20th century system that is ill-suited to our 21st century world, and they will prolong our reliance on dirty fossil fuels.

Dr. Cleetus testified at a hearing on June 30, 2021, held by the House Financial Services Subcommittee on Consumer Protection and Financial Institutions, titled “Addressing Climate as a Systemic Risk: The Need build resilience within our banking and financial system”.

UCS has already submitted comments to the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Housing Finance Agency to outline each agency’s role in ensuring climate change risks are considered. UCS also endorsed congressional action on these issues, including organizing a letter of support for the Climate Risk Disclosure Act of 2021 presented by Rep. Sean Casten, D-IL.