US Regulator Calls Climate Change a Systemic Risk

Rodiano Bonacci
Settembre 13, 2020

The Commodity Futures Exchange Commission has called for enhanced disclosure by public companies of climate-related financial risks to help prevent climate change from disrupting the USA financial system.

That is one of the findings of a landmark report commissioned by the U.S. Commodity Futures Trading Commission and put together by a panel convened about 10 months ago by Rostin Behnam, one of two Democrats on the five-member CFTC.

"The physical impacts of climate change are already affecting the United States, and ... the transition to net-zero emissions may also impact many segments of the economy", the 196-page report said.

All the group's 35 members, including representatives of Goldman Sachs Group Inc, the Dairy Farmers of America, and The Nature Conservancy among others, approved the report.

A disclaimer included in the report, published on Wednesday, says its views "do not necessarily" reflect those of the CFTC or the federal government. U.S. president Donald Trump withdrew from the Paris Agreement in 2017.

"It tells you what systemic risk is", she said.

And because the COVID-19 pandemic has depleted household wealth, government budgets and business balance sheets, the economy is more vulnerable than before, it added, "increasing the probability of an overall shock with systemic implications".

Its first recommendation is to "establish a price on carbon" that is hefty enough to push businesses and markets to cut use of carbon dioxide-producing fuels such as oil and gas. Taxing carbon would require action by Congress. "If our financial markets do a good job of pricing the risks from climate change, then our society is much more likely to address the problem", Dukes said. Our financial system has been built to price in risks and minimize the damage from sudden shocks, but it hasn't done a good job of pricing or planning for climate change.

The report, "Managing climate risk is the US financial system", also gives 53 recommendations for how regulators can be better prepared to deal with the risks of global warming and to foster innovation to tackle it.

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