The Financial Stability Oversight Council (FSOC) today released its report on Climate-Related Financial Risk.
The report includes more than 30 specific recommendations to U.S. financial regulators, and lays out necessary actions to identify and address climate-related risks to the U.S. financial system, which include warming temperatures, rising sea levels, droughts, wildfires, intensifying storms and other climate-related events that are already imposing significant costs on the public and U.S. economy.
Established under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the FSOC provides comprehensive monitoring of the stability of the nation's financial system.
The recommendations that the FSOC and its members can adopt to strengthen the financial system and make it more resilient to climate-related shocks and vulnerabilities fall into four broad categories:
- Building capacity and expanding efforts to address climate-related financial risks
- Filling climate-related data and methodological gaps
- Enhancing public climate-related disclosures
- Assessing and mitigating climate-related risks that could threaten the stability of the financial system
One key takeaway from the report regarding the banking sector is there is no bank capital charge. In other words, the report does not seek to impose a capital charge on banks for climate change risk.