New Senate Special Committee Report Urges Financial Regulators to Tackle Climate Change As a Systemic Threat to U.S. Economy

August 25, 2020 /3BL Media/ - A major report released today by the U.S. Senate Democrats’ Special Committee on the Climate Crisis urges financial regulators to protect the U.S. economy from the systemic risk of climate change, a call to action that Steven M. Rothstein, Managing Director of the Ceres Accelerator for Sustainable Capital Markets, calls “much needed and much appreciated.”
 
The report, The Case for Climate Action: Building a Clean Economy for the American People, makes the case that “climate change poses significant risks to the financial system and our nation’s economy. The financial industry and the regulators responsible for overseeing it must start taking these risks seriously to avoid a future financial shock.” 
 
It issues a set of important recommendations for U.S. financial regulators, including that they acknowledge and act on climate change as a systemic financial risk, that they join their international counterparts who are already engaging around this issue, that they mandate climate risk disclosure, and that they conduct climate scenario analysis and stress tests to measure resilience to climate risk.

Rothstein continued: “We entrust our financial regulators with protecting our economy from systemic threats, and climate change is a clear systemic threat to our financial system. It is encouraging to see these U.S. senators show strong leadership by supporting the recommendations of this report and by speaking out with clear guidance on how financial regulators can and must do better. We applaud their work in producing such a detailed and thoughtful report, and we urge financial regulators to read it and act on it.” 

In focusing on the systemic financial risks of climate change and the critical role of financial regulators in tackling them, the Committee’s report adds to the growing chorus of calls for action from financial regulators. In June, the Ceres Accelerator for Sustainable Capital Markets issued its own report, Addressing Climate Change as a Systemic Financial Risk: A Call to Action for U.S. Regulators, recommending more than 50 specific actions financial regulators should take to incorporate climate change across their mandates. 
 
In July, investors with nearly $1 trillion in assets under management joined with a bipartisan collection of former members of Congress, former regulators, corporate executives, philanthropic foundations, and advocacy organizations to urge the heads of U.S. financial regulatory agencies to act on climate change as a systemic financial risk, and to consider implementing the recommendations of the report from the Ceres Accelerator. California Comptroller Betty T. Yee, a Ceres board member, also called on financial regulators to act on climate change in an op-ed published in Barron’s Magazine, while Sen. Elizabeth Warren, D-Mass., urged the Securities and Exchange Commission to tackle climate change as a systemic risk in a letter to the agency’s chair.

The Ceres Accelerator for Sustainable Capital Markets (the Ceres Accelerator) is transforming the practices and policies that govern capital markets in order to accelerate action to reduce the worst financial impacts of the global climate crisis and other sustainability threats. The Ceres Accelerator spurs capital market influencers to act on these systemic financial risks and drives the large-scale behavior and systems change needed to achieve a net-zero carbon economy and a just and sustainable future. It focuses on four flagship initiatives: Regulating Climate as a Systemic Risk, Achieving Paris-Aligned Portfolios, Financing a Net-Zero Carbon Economy, and Board Governance for a Sustainable Future. For more information visit: ceres.org/accelerator.