Updated with clarification
The first U.S. government report on climate change's financial impact is sparking some optimism among sustainability-minded investors and advocates.
"The importance of this report to investors can't be overstated," said Divya Mankikar, investment manager for the sustainable investment team at the $417.3 billion California Public Employees' Retirement System, Sacramento.
"It is a dramatic milestone," noted Steven Rothstein, Boston-based managing director of the Ceres Accelerator for Sustainable Capital Markets, a Ceres initiative advocating for capital market policies to address global climate change.
The report was requested by CFTC Commissioner Rostin Behnam and issued Sept. 9 by the Commodity Futures Trading Commission's climate-related market risk subcommittee, an advisory group. It 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 United States, "sometimes simultaneously and within a relatively short time frame."
The 34 members of the non-partisan advisory subcommittee, including Ms. Mankikar and representatives of Wellington Management Co. LLP, Vanguard Group Inc., Allianz Global Investors and BNP Paribas Americas as well as corporate interests, voted unanimously to adopt the report, "Managing Climate Risk in the U.S. Financial System." With climate change one of the top three risks to CalPERS, along with investment returns and employers' ability to contribute to the pension fund, "CalPERS was honored to be nominated to the subcommittee, joining a panel of experts in sounding an urgent call for U.S. financial regulators to set a clear path to a low-carbon economy," Ms. Mankikar said.
The report does not represent the CFTC's official position on climate change. Chairman and Chief Executive Heath Tarbert, a Republican, in a statement acknowledged the importance of climate risk, but also pointed out that the report touched on transition risks that "could be just as disruptive to our financial system as the possible physical manifestations of climate change, and that moving too fast, too soon could be just as disorderly as doing too little, too late."