Climate groups respond to news of FSOC Climate Hub

Today in its regular meeting, the Financial Stability Oversight Council, or FSOC, announced that the Office of Financial Research has launched a new Climate Data and Analytics Hub pilot program, “a new tool to help financial regulators assess potential risks to financial stability stemming from climate change.” According to the fact sheet, “The Hub will allow participants to integrate wildfire, crop condition, precipitation, and other climate-related data with financial data for a more precise view of the relationship between climate change and financial stability risk.” The news comes on the same day as an investor coalition representing $52 trillion in assets worldwide found 27 giant banks in North America, Europe, and Asia are failing the climate goals of the Paris Agreement.

In May 2021, President Biden issued an Executive Order in which he stated his administration’s policy to “act to mitigate [climate-related financial risk] and its drivers” and ordered Secretary Yellen, as the chair of FSOC, to coordinate research & action by financial regulators. Secretary Yellen led the publication in October 2021 of an FSOC report on Climate-related Financial Risk and acknowledged that “climate change is an emerging and increasing threat to America’s financial system that requires action.”

Member organizations of Stop the Money Pipeline coalition have awaited FSOC actions to mitigate climate-related financial risk, including:

issuing guidance for conducting scenario analyses;
conducting a system wide climate stress test to evaluate whether capital surcharges, concentration and/or portfolio limits or other macroprudential stabilizers are needed;
withdrawing 2019 guidance that made designation of Systemically Important Financial Institutions more difficult; and
adopting new guidance that includes climate risk in its criteria for designating a nonbank as one such institution.

According to NOAA, “in 2022 (as of July 11), there have been 9 weather/climate disaster events with losses exceeding $1 billion each to affect the United States.” Climate-related weather disasters cost the US economy more than $145 billion in 2021 and over the last five years, they have cost $750 billion. Earlier this month, the European Central Bank’s climate stress test of 104 banks showed that 60% of the banks do not yet have a climate risk stress-testing framework.

Members of the Stop the Money Pipeline coalition released the following statements:

“The Financial Stability Oversight Council’s mandate is not merely to study risks, but to respond to and mitigate those risks. A federal climate research hub is a positive step, but what our economy and the frontline communities bearing the brunt of the climate crisis really need is for financial regulators to address the drivers of climate-related financial risks,” said Ben Cushing, Campaign Manager for the Sierra Club’s Fossil-Free Finance campaign. “We know US financial institutions are fueling the climate crisis and failing to manage the risks to our financial system, and it’s imperative that our federal regulators move quickly to rein in Wall Street’s risky practices.”

“The creation of a Climate Data and Analytics Hub is excellent, if long overdue. It is absolutely critical that financial regulators have the data and research tools they need to fully assess the threat climate change poses to American financial stability and respond to it,” said Dorothy Slater, Senior Researcher at the Revolving Door Project. “However, a climate hub will be meaningless if it doesn’t have proper staff and resources to function, and OFR is massively understaffed. Biden must ensure that OFR – and any new climate offices housed within it – are actually empowered with the resources necessary to fully honor and implement their mandate.”

“Today’s announcement is yet another signal that Janet Yellen is completely out of step with the urgency that climate risk poses to our economy and financial system. While we welcome all steps forward to better capacitate government agencies to understand climate-related financial risk, undertaking research and data analysis is simply insufficient at this time,” said Kathleen Brophy, Senior Strategist at the Sunrise Project. “Almost two years into Biden’s presidency, announcing more research into the problem without ambitious plans from FSOC to begin mitigating the problem is completely unacceptable.”

The Stop the Money Pipeline coalition is a coalition of nearly 200 organizations working to hold the financial backers of climate chaos accountable.

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