Nobody understands the compounding of crises like bankers. Very few of the risks we manage exist in isolation, and the multifaceted risks that destabilizing the climate presents for the banking sector have now begun moving from a future concern to a current reality. From the growing insurance bubble to rising losses from extreme weather and climate-fueled inflation from both agriculture and carbon-based energy, the climate crisis is showing up in an already strained credit environment. The case for action to mitigate climate change has never been clearer. But even with the meaningful action already taken across different sectors including ours, the banking sector isn't moving fast enough to match the pace of our changing planet.
Across the banking industry there has been significant progress on the first step of climate action, which is measuring. The Partnership for Carbon Accounting Financials (PCAF) has brought together major players in the financial sector. From insurance to asset management and private equity, so many are now a part of this meaningful and growing partnership. Globally, more than 430 firms with assets of approximately $90 trillion are committed to a standardized way of accounting for emissions associated with their financial activity. My bank was proud to support the California bill that recently became law, and which requires companies with revenue over $1 billion to fully disclose their direct and indirect emissions. That is a win for investors and the public, while it will require more from banks.
The financial industry, with leadership from Mike Bloomberg, also launched the Task Force on Climate-Related Financial Disclosures and in turn has helped to bring important new sustainability reporting standards by the International Sustainability Standards Board. There is important work being done within the financial sector to outline frameworks and standards for transition finance that are going to be critical to a managed transition. This work was reinforced during the United Nations' Climate Week by the announcement of new transition finance principles from the U.S. Treasury.
But for all our collective leadership and progress, we are at an inflection point when our commitments also need to speed up and our goals expand. The world is not on track to meet its climate targets and we are skirting a level of systemic risk that will not spare the firmest of institutions or the best risk officers. This summer gave us a tragic glimpse of that future.
Here are what we view as the critical next steps.
The Security Traders Association conference in D.C. led a panel about the SEC's proposal to scale back robo-advisors and AI in markets.
Greenhouse gas emissions disclosures are important, material and the investor demand is clear, so it's time to abandon the fear of politics and culture wars and come together in support of the Securities and Exchange Commission's proposed rule change on climate disclosures. This rule would allow for investors to understand climate-related risks, such as greenhouse gas emissions, that could have an impact on businesses, operations and/or their finances. We've always operated under the notion that investors deserve to be able to make informed decisions, so there is no reason that shouldn't include information about potential climate-related risks. The SEC should finish the job and banks should embrace the new requirement.
We also need to develop consistent and rigorous approaches to transition finance. Banks cannot hide behind the rhetoric of financing the transition without rigor and transparency. Everyone should be publishing tangible goals with hard deadlines while also implementing measures that allow for accountability when it comes to meeting these benchmarks. Again, this is a place where the industry has been contributing to common approaches and standards, even if it is not all the way there yet.
We need to raise our expectations of what will be required of us. We know the climate crisis is real, but we also must recognize the speed of its growth. The signals in the real economy, in the insurance sector, in emissions and in climate impacts are all telling us we will need to do more — and faster. So as hard as even some of the leading institutions are working on existing climate commitments, we have to be clear that these goals are just the beginning. Specifically, the financial sector cannot keep financing new development of fossil fuels when we know we must reduce both fossil fuel demand and supply to stay within the bounds of a stable climate. We also need to ask more of our policymakers globally and at home. From building codes to transit and energy policy, it's the work of policymakers that will be determinative in whether we avoid the compounding crisis of climate change. Banks should not be on the sidelines for those conversations and should bring our expertise and voice to supporting policies that allow for a more sustainable and bankable world.
Building things together for the benefit of our clients, investors and the world we live in works. We can make our institutions and the world better and we've seen that reflected in our progress. But it will also require some big decisions ahead. So, let's not use the news cycle of the next billion-dollar disaster as an opportunity to just say we need to do more. Let's do more.
