Warren asks banks to turn over plans to prepare for climate change

Warren asks banks to turn over plans to prepare for climate change
© Greg Nash

Sen. Elizabeth WarrenElizabeth WarrenBiden campaign says no VP pick yet after bike trail quip Biden edges closer to VP pick: Here's who's up and who's down Democratic convention lineup to include Ocasio-Cortez, Clinton, Warren: reports MORE (D-Mass.) sent a series of letters to the nation’s largest banks Wednesday asking them to turn over their plans for how they will prepare for the financial risks of climate change.

“As climate change continues to affect our economy, it is critical to understand your bank's adaptation and mitigation strategies,” Warren wrote.

Warren’s letter highlighted a number of financial risks that could stem from climate change, all part of a package of research from the Federal Reserve Bank of San Francisco.

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Sea level rise and floods could impact the real estate market. Increasingly severe natural disasters could stress financial markets, particularly as displaced people move away from often-hit areas.

Those factors may increase reliance on banks. Cities and states may need capital to invest in new infrastructure more resilient to the effects of climate change, like reinforcing shorelines or raising roads. 

“The climate crisis demands that banks accurately estimate and mitigate risks to social and economic stability; it also presents mutually beneficial investment opportunities, particularly in climate-resilient urban infrastructure,” Warren wrote.

The letter was sent to JPMorgan Chase, Citigroup, Bank of America, Goldman Sachs, Wells Fargo, Bank of New York Mellon, Morgan Stanley and State Street.

Warren’s letter comes as environmentalists’ push for Wall Street to take action on climate change is gaining traction.

Earlier this month investment firm BlackRock announced sustainability — both environmental and financial — would feature more prominently in its analysis, a move that leads the company away from investment in fossil fuels.

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The letter, which asked for banks to respond by Feb. 7, won’t just document banks' response to climate change, but also asks the financial institutions to go on the record on their support for a Warren bill that would require “bank stress tests” for various climate scenarios.

The tests would require banks to evaluate risk at 1.5 degrees Celsius of warming above pre-industrial levels, 2 degrees of warming, and one assuming a "business as usual" path.

If banks did not provide a satisfactory plan under each scenario, the Federal Reserve could block them from making loans. 

JPMorgan Chase & Co. said they were reviewing the letter. Other banks contacted by The Hill did not immediately respond to request for comment.