Yellen to lead investigation into climate change risk to financial system
Treasury Secretary Janet Yellen said on Sunday that she will lead a regulatory review to assess the risks that climate change may have on the financial stability of the U.S.
The Financial Stability Oversight Council (FSOC), which is chaired by Treasury secretary and comprised of U.S. regulators from the Federal Reserve System, Securities and Exchange Commission (SEC) and others, will do an analysis as part of an executive order that the president signed regarding the financial risks related to climate, “outlining a whole-of-government process to assess climate risk to the U.S. financial system and federal government,” Yellen said.
“The current financial reporting system is not producing reliable disclosures. We also need consistency of reporting frameworks over time, as well as comparability across firms and jurisdictions, providing the useful information that investors need to make informed decisions,” she said during prepared remarks on Sunday for the Venice International Conference on Climate.
Yellen also said that it would FSOC would look to improve these disclosures as a part of the Biden administration’s initiative.
“The executive order also made clear this administration’s policy to advance the disclosure of climate-related financial risks, which we will also explore through FSOC. This will complement the work of the SEC, which is currently reviewing existing guidance on climate-related financial disclosures,” she said.
Some banking executives are concerned that the Biden administration’s efforts coil encourage more regulatory oversight, making it harder for them to make loans and making it more expensive for banks to do business, The Associated Press noted.
Yellen has stated, however, that climate change “introduces new and increasing types of risk,” and that it “challenges one of the financial sector’s most essential functions—ensuring that risk is borne by investors and institutions well placed to manage it.”