US Commodity Futures Trading Commission (CFTC) recently released a major new report: “Managing Climate Risk in the US Financial System.” The report presents 53 specific recommendations to mitigate the risks to financial markets posed by climate change. It concludes that:
- Climate change poses a major risk to the stability of the US financial system and to its ability to sustain the American economy;
- Climate-related risks may also exacerbate financial system vulnerabilities that have little to do with climate change, including those caused by a pandemic that has stressed balance sheets, strained government budgets and depleted household wealth;
- US financial regulators must recognize that climate change poses serious emerging risks to the US financial system, and they should move urgently and decisively to measure, understand and address these risks;
- Existing statutes already provide US financial regulators with wide-ranging and flexible authorities that could be used to start addressing financial climate-related risks now;
- Regulators can help promote the role of financial markets as providers of solutions to climate-related risks; and
- Financial innovation is required not only to efficiently manage climate-related risks but also to facilitate the flow of capital to help accelerate the net-zero transition and increase economic opportunity.