The Commodity Futures Trading Commission said Wednesday it has launched a special climate-risk unit.
The interdivisional unit will focus on the role of derivatives markets in addressing climate-related risk and transitioning to a low-carbon economy.
The unit "is intended to accelerate early CFTC engagement in support of industry-led and market-driven processes in the climate — and the larger ESG — space critical to ensuring that new products and markets fairly facilitate hedging, price discovery, market transparency and capital allocation," a CFTC news release said.
Acting CFTC Chairman Ross Behnam set the stage for climate-risk action by the regulator in 2019 by asking an advisory panel to look at risks in the U.S. financial system. The resulting September report by the advisory climate-related market risk subcommittee warned that "frequent and devastating shocks from climate change" pose a threat to U.S. financial markets, affecting multiple sectors, geographies and assets in the U.S., "sometimes simultaneously and within a relatively short time frame."
In the statement announcing the new risk unit, Mr. Behnam said, "the COVID-19 pandemic as well as increasingly severe weather and environmental impacts have firmly established the role of financial regulators in providing decisive leadership in times of market stress."
Given the major threat of climate change to U.S. financial stability, "I believe we must move urgently and assertively in utilizing our wide-ranging and flexible authorities to address emerging risks," he said.
The CFTC will also play a key role in developing globally consistent standards, he said.
On Monday, Acting SEC Chairwoman Allison Herren Lee said her agency will seek public input on how companies should disclose climate-change risks to investors.