In his first public speech as Vice-chair for Supervision at the Federal Reserve Board of Governors, Michael Barr today announced that the Federal Reserve would take its first steps to require financial institutions to assess how their long-term financial position could be impacted by the physical harms of climate change and the economic transformation caused by the zero-emissions energy transition.
Further, Barr confirmed that the Federal Reserve would join the Principles for Climate Risk Management for Large Banks, issued in draft form by the Federal DepositInsurance Corporation and the Office of the Comptroller of the Currency.
In response to today’s announcement, David Arkush, managing director of Public Citizen’s climate program, issued the following statement:
“Barr’s remarks are welcome, and the actions he describes are long overdue. Climate impacts are already affecting the economy, financial institutions, and the financial system, and we know they will worsen rapidly. Big banks must explain how they are preparing.
“Financial institutions need to show that they are planning for the clean-energy transition—and participating in it at a pace that matches science-based targets, which governments in the U.S. and abroad are increasingly pursuing. Most big U.S. banks say they are committed to “net zero by 2050,” yet they continue to lead the world in financing a system based on fossil fuels.
“Recently enacted policies like those in the Inflation Reduction Act and in the state of California will propel the clean-energy transition faster than was expected just a couple of months ago. That means big banks that are still financing fossil fuels are at even greater risk of those assets being stranded and their loans going unpaid. The Fed needs to rein in their recklessness.”
For more information: read Looking Over the Horizon: The Case for Prioritizing Climate-Related Risk Supervision of Banks