The U.S. economic system , including banks, agricultural and oil interests, also as regulators and investors, requires a unified front in accounting for climate-change risk, says the primary comprehensive government report on such efforts.
Notably, the report released Tuesday by the Commodity Futures Trading Commission and an affiliated panel representing several sectors revives a involve taxing carbon pollution.
The CFTC’s Climate-Related Market Risk Subcommittee of the Market Risk Advisory Committee released its findings in Managing Climate Risk within the U.S. economic system . The panel behind the discharge voted unanimously 34-0 to adopt the over 190-page report which recommends that 16 financial regulators and other bodies “incorporate climate-related risk into their mandates and develop a technique for integrating these risks in their work, including into their existing monitoring and oversight functions.” Disjointed rules and goals has been a serious gripe from an investing world that’s increasingly factoring in global climate change to decision-making.
The report provides 53 recommendations to be implemented across financial regulatory agencies, and involves a national price on carbon pollution. Such a tax would require congressional approval. U.S.-based carbon pricing has thus far been a regional effort, and with mixed results.
The panel’s leadership also took the chance to link the immediacy of financial-market adaption to climate change-linked headlines dominating current events even while COVID-19 hampers the economy.
“As we’ve seen within the past few weeks alone, extreme weather events still sweep the state from the severe wildfires of the West to the devastating Midwest derecho and damaging Gulf Coast hurricanes. This trend — which is increasingly becoming our new normal — will likely still worsen in frequency and intensity as a results of a changing climate,” said CFTC Commissioner Rostin Behnam, one among two Democrats on the five-member body.
“Beyond their physical devastation and tragic loss of human life and livelihood, escalating weather events also pose significant challenges to our economic system and our ability to sustain long-term economic process ,” he said. While wildfires and hurricanes occur for myriad reasons, their frequency and intensity has factored into the climate-change discussion.
The bipartisan and cross-sector panel included 35 representatives starting from Goldman Sachs Group GS, +0.45% to grease giant BP BP, -0.07%, agricultural groups and environmental interests including the character Conservancy and Ceres.
“For a politically and sectorally diverse group of influential members to issue such a robust involve regulatory action is testament to only how important a financial issue global climate change is, and to only how urgently we’d like leadership now,” said Mindy Lubber, president and CEO of sustainable-investing advocate Ceres and a member of the panel.
The CFTC group’s chief recommendation is to “establish a price on carbon” that’s robust enough to incentivise the private sector to chop use of carbon dioxide-producing oil and gas.
Beyond that aim, the report’s dozens of other recommendations include a sweeping rewrite of monetary market rules and practices that would proceed without congressional act and regardless of who wins the presidency come November, including requiring banks to deal with climate-related financial risks and publicly-traded companies to disclose emissions.
The report, which presents 53 recommendations to mitigate the risks to financial markets posed by global climate change , concludes that:
- global climate change poses a serious risk to the steadiness of the U.S. economic system and to its ability to sustain the American economy;
- Climate risks can also exacerbate economic system vulnerability that have little to try to to with climate change; including vulnerabilities caused by an epidemic that has stressed balance sheets, strained government budgets, and depleted household wealth;
- U.S. financial regulators must recognize that global climate change poses serious emerging risks to the U.S. economic system , and that they should move urgently and decisively to live , understand, and address these risks;
- Existing statutes already provide U.S. financial regulators with wide-ranging and versatile authorities that would be wont to start addressing financial climate-related risk now;
- Regulators can help promote the role of monetary markets as providers of solutions to climate-related risks; and
- Financial innovation is required not only to efficiently manage climate risk but also to facilitate the flow of capital to assist accelerate the net-zero transition and increase economic opportunity.
Regulators within the us have thus far lagged behind their European counterparts in addressing climate-change risk within the economic system . The Trump administration has been largely rolling back environmental regulations, alleging their costly burden on business and inconsistent enforcement. The administration has also targeted the inclusion of Environmental, Social and Governance (ESG) investments in retirement plans.
“Financial institutions face real risks from global climate change and re-aligning their investment and lending portfolios to net-zero greenhouse emission emissions not only addresses that risk, it also provides additional capital to take a position in ways in which will contribute to reducing the emissions driving global climate change , including investment in nature climate solutions,” said Dave Jones, senior director, environmental risk for the character Conservancy, who participated on the panel. “Nature” solutions historically have included reforestization and carbon capture.
The Federal Reserve System this year for the primary time officially acknowledged the potential for global climate change to destabilize the economic system , while mulling possible responses.
The report urges financial authorities, including the Fed, to integrate climate risk “into their record management and asset purchases, particularly concerning corporate and municipal debt.”