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US regulators present a plan to address financial climate risks



(Reuters) – Climate change is a "growing threat" to financial stability that regulators should address in their day-to-day work, a U.S. top official said on Thursday.

It was a first for the United States, which has lagged behind other rich countries to deal with financial climate risks.

The Financial Stability Oversight Council issued a 133-page report that could ultimately lead to new rules and stricter supervision for Wall Street. It constituted a roadmap for integrating climate risk management into the financial regulation system.

This includes filling in data gaps, pushing for climate-related disclosures from companies, increasing the climate knowledge of agencies and building tools to better model and forecast financial risks, such as scenario analysis.

The FSOC is composed of the heads of the best financial bodies and is chaired by the Minister of Finance, Janet Yellen. The report was created after the financial crisis of 2007-09 and is to identify and address vulnerabilities in the US financial system.

The report is part of President Joe Biden's plan to aggressively address climate change and comes ahead of his trip to Glasgow, Scotland. , for a UN climate summit.

"It is a critical first step towards the threat of tackling climate change, but will in no way be the end of this work," Yellen said of the report.

With Biden's climate agenda still in a divided Congress, the report will signal to the world that the United States is serious about tackling climate risks, contributing to the global debate on the issue.

"This is the first time that all of the banking and finance regulators will come out in a document and talk about what they can do for climate change," said Todd Phillips, director of financial regulation at the Center for American Progress, a liberal think tank.

Climate change could boost the financial system as physical threats such as rising sea levels, as well as policies and carbon-neutral technologies aimed at slowing global warming, could destroy trillions of dollars in assets, say risk experts.

In a 2020 report, the Commodity Futures Trading Commission cited data that estimated that $ 1

trillion to $ 4 trillion dollars in global wealth linked to fossil fuels could eventually be lost. With a record $ 51 billion poured into US sustainable funds by 2020, investors are pushing for better information on the risks companies face from climate change.

U.S. Regulators have so far done little to address climate risks, and the United States is dragging its peers into the matter. Biden has said that he wants every government agency to start introducing climate risk into its agenda.

The report also calls for the FSOC to set up two new internal committees. One would consist of supervisory staff who often report on efforts to police climate risks. The second will be an advisory committee for external experts, including from academia, non-profit organizations and the private sector.

The lack of recommendations for tough new rules frustrated some progressives and environmental groups, who are keen on bold steps from Washington to address what Biden himself has called an existential crisis.

Steven Rothstein, CEO of Ceres Accelerator for Sustainable Capital Markets, a climate advocacy group, said it was good regulators who identified climate change as an undeniable risk, but more must come quickly.

"With a very small window to prevent the next climate catastrophe, each agency must now provide specific timelines when planning to take action to protect the safety and health of our financial system, our institutions, our savings and our communities," he said. in a statement.


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