Financial Stability Oversight Council Publishes Climate Change Report

On October 21 2021, the Financial Stability Oversight Council (FSOC) published a new report on climate change, highlighting for the first time that climate change posed a significant threat to US financial stability.

It also set out recommendations for government agencies to follow in order to address climate issues.

The American Bankers’ Association (ABA) and the Office for the Comptroller of the Currency (OCC) have responded to the report.

Acting comptroller of the currency Michael Hsu said: “The report provides valuable information on the risks climate change pose to OCC regulated institutions as well as to the entire financial system.

“The report’s recommendations provide a clear framework and lay out concrete steps for the OCC, FSOC, and other FSOC members to take to better measure, monitor, and address climate-related financial risks.”

The ABA said that it was notable, however, that FDIC chairman Jelena McWilliams abstained from the vote to approve the climate report, citing concerns that the timeframe under which the recommendations were developed was too limited.

The report emphasized, among other things, that regulators must continue to consider and incorporate climate-related risks into their supervisory programs.

It also called for greater use of enhanced climate-related risk disclosures and the establishment of a dedicated FSOC committee to assess climate-related financial risks, as well as an advisory committee comprised of a range of industry stakeholders.

Secretary of the Treasury Janet Yellen said: “FSOC’s report and recommendations represent an important first step towards making our financial system more resilient to the threat of climate change.”

“These measures will support the administration’s urgent, whole-of-government effort on climate change and help the financial system support an orderly, economy-wide transition toward the goal of net-zero emissions,” she added.