Half the country faces fire and wind, the other half wind, rain and flood. Despite nay-saying from some members of Congress, the Biden administration’s financial regulators continue to make the global climate change crisis a financial regulatory priority. As I wrote in this space back in March:
“Happy to report that after a long period of head-in-the-sand actions by their predecessors, some old and all of the new leaders at financial regulatory agencies see the risks of climate change to the economy and know that investors need to know more about it, too. The climate crisis is real.”
As the rain and wind remnants of Hurricane Ida, which devastated Louisiana, pass through the DC area (we have heavy showers and area flooding and are on a tornado alert today) and head toward New Jersey, New York and New England, while the Caldor fire threatens Lake Tahoe, among innumerable Western wildfires, I thought it would be worthwhile to describe just some of the recent efforts by financial regulators and Congress to better account for the material effects of climate change on the financial system and the overall economy.
This week, the Department of the Treasury “announced that the Federal Insurance Office (FIO), in response to President Biden’s May 2021 executive order on climate change, is requesting information and soliciting public comment [comments are due mid-November] on the insurance sector and climate-related financial risks.”
Also this week, Securities and Exchange Commission chair Gary Gensler announce a series of actions “to carefully monitor developments as a result of Hurricane Ida making landfall on Aug. 29, 2021. The safety of local residents is our highest priority.[…] Investors should be vigilant for Hurricane Ida-related securities scams and check the background of anyone offering them an investment by using the free and simple search tool on Investor.gov. The Division of Enforcement will vigorously prosecute those who attempt to defraud victims of the storm. The SEC is asking investors to report any suspicious solicitations at http://www.sec.gov/complaint/tipscomplaint.shtml.” In July, Gensler had announced the appointment of a climate counsel to his policy staff. Throughout the new administration’s tenure, he and previous acting chair commissioner Allison Herren Lee have announced a series of climate and ESG (Environmental, Social and Governance-related investments) actions.
In July, Federal Reserve vice-chair for supervision Randal Quarles, speaking as chair of the international Financial Stability Board, addressed the Venice International Conference on Climate Change, Venice, Italy:
“Globally consistent, comparable, and reliable disclosures, as well as a broader set of high-quality, relevant data, together, can provide the basis to assess climate-related financial risks and the impact on financial stability.[…]Our data needs include data on the underlying drivers of physical and transition risk and financial institutions’ exposures. The challenges here are considerable. To understand the financial risks, better information is needed on the underlying physical risks, including the sorts of extreme weather events that pose greatest risks to the balance sheets of households, firms, and financial institutions.[…]The FSB, as laid out in its roadmap, has taken on a critical role in coordinating and carrying forward work that will make the global financial system more resilient to the threats posed by climate change.”
Also, Senate Banking and Housing committee chair Sherrod Brown (OH) has held a series of hearings on climate and the financial system, including a July hearing on “21st Century Communities: Climate Change, Resilience, and Reinsurance.” Unfortunately, ranking member Pat Toomey (PA) again expressed reluctance to recognize the importance of further efforts:
“First, there is actual significant debate within the scientific community about global warming’s impact on man and the economy. Second, direct economic damages associated with extreme weather events have actually decreased both globally and in the United States when measured against GDP. Third, insurance and reinsurance companies, whose existence depends upon the presence of uncertain risks, have always adjusted to changing risk, and climate-related risks are no exception. In March, all 12 Republicans on this Committee sent a letter to Fed Chairman Jay Powell expressing concern that financial regulators were seeking to impose costly new rules based on highly uncertain climate models.”
On the House side, Chairwoman Maxine Waters issued the a statement at a June Financial Services Committee hearing on “Addressing Climate as a Systemic Risk.”
U.S. PIRG, the state PIRGs and our sister organizations Environment America and Frontier Group have issued a series of reports on the need to take bold action to seek climate solutions, before it’s too late. We look forward to continuing to work with Congress and the Biden administration to ensure that the financial system, as well as the energy, transportation and other commercial sectors seek solutions to the climate crisis, before it’s too late. It’s not bingo; it’s not a game at all.
Senior Director, Federal Consumer Program, PIRG
Ed oversees U.S. PIRG’s federal consumer program, helping to lead national efforts to improve consumer credit reporting laws, identity theft protections, product safety regulations and more. Ed is co-founder and continuing leader of the coalition, Americans For Financial Reform, which fought for the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including as its centerpiece the Consumer Financial Protection Bureau. He was awarded the Consumer Federation of America's Esther Peterson Consumer Service Award in 2006, Privacy International's Brandeis Award in 2003, and numerous annual "Top Lobbyist" awards from The Hill and other outlets. Ed lives in Virginia, and on weekends he enjoys biking with friends on the many local bicycle trails.