WASHINGTON — How the Biden administration’s focus on climate risk will affect regulators’ oversight of the U.S. financial system is, slowly but surely, coming into view.
In May, the administration directed federal agencies to paint a picture of the country’s economic vulnerabilities related to climate change and craft policies to address them. The goal was to mitigate risks to homeowners, consumers, businesses and workers, the financial system, and the federal government.
Just last week, the White House issued a fact sheet detailing six core pillars of its approach to combating climate risk. Those pillars include boosting the financial system’s resilience, protecting citizens’ savings and pensions, making the government’s procurement practices greener, incorporating climate risk in underwriting of government-backed mortgages, and building more resilient infrastructure.
The administration’s directives have mobilized agencies to act, but in some cases Biden-appointed regulators were already moving aggressively to address climate-related risks.
Earlier this month, Federal Reserve Board Gov. Lael Brainard said the central bank will
An upcoming report by the Financial Stability Oversight Council may put more flesh on the bone about how regulators will view climate risks in bank supervision. Meanwhile, some agencies have already moved ahead more aggressively. For example, the Securities and Exchange Commission is working on a rule to require publicly traded companies to issue disclosures about their impact on and risks from climate change.
Many bankers, including those at many of the country’s largest institutions, have acknowledged the looming business risks from extreme weather events, a societal transition to cleaner energy sources and other consequences of a rapidly heating planet.
At the same time, many financiers remain leery of climate regulations that could burden them with significant new disclosure requirements, tie their hands when lending to certain industries or even increase capital requirements.
It is certain that the Biden administration will remain on a path to try to blunt the impact of climate change on the U.S. economy. What follows is a breakdown of the biggest anticipated policy moves on the horizon for banks and other financial institutions.