Most U.S. financial regulators lag their global peers when it comes to addressing the systemic risks of climate change, according to a report released Tuesday by the Ceres Accelerator for Sustainable Capital Markets.
"The good news is that more regulators than ever are stepping up and speaking out about the systemic financial risks of climate change. The bad news is that they aren't moving fast enough, many of their peers aren't moving at all yet, and the dangers of inaction are mounting by the day," said Steven M. Rothstein, managing director of the Ceres Accelerator for Sustainable Capital Markets, in a release.
The report, Turning Up the Heat: The need for urgent action by U.S. financial regulators in addressing climate risk, includes a scorecard on U.S. financial regulators' progress in addressing the systemic financial risks associated with climate change.
Some U.S. regulators are beginning to act, Mr. Rothstein said. The Federal Reserve has affirmed climate change as a systemic financial risk, and joined a global group of central banks, the Network for Greening the Financial System. Treasury Secretary Janet Yellen, who also serves as head of the interagency Financial Stability Oversight Council, said the Biden administration "is committed to using the full power of the U.S. federal government to address climate change as part of the Build Back Better plan."
The Securities and Exchange Commission now has a senior policy adviser for climate and ESG, and acting Chairwoman Allison Lee has ordered an enhanced staff focus on climate-related disclosures.
Yet most U.S. financial regulatory agencies still have not yet affirmed climate change as a systemic financial risk, and even fewer have a system for assessing and mitigating that risk, the report said.
"U.S. regulators are only just beginning to dip their toes in the water. They need a navigation system with proven strategies to help them speed up their efforts, catch up with European regulators, and get to the shared destination we desire: a sustainable future," Yue Chen, director of Sustainability and Climate Initiatives at the New York State Department of Financial Services, said in the foreword to the report, which also looks at systemic financial risk to the U.S. economy from climate change, systemic racism and the COVID-19 pandemic recovery.