Yellen to Assess Risk Posed By Climate Change to US Financial System
This past May, President Biden signed an executive order on climate-related financial risk, a cross-governmental plan that directs federal agencies to identify and mitigate financial risks presented by climate change to Americans, businesses, and the government itself.
Progress on this order was made over the weekend when Treasury Secretary Janet Yellen announced that the Financial Stability Oversight Council (FSOC) will assess the potential risk that climate change may pose to the financial stability of the US, as "the current financial system is not producing reliable disclosures." Yellen added:
The Executive Order also made clear this Administration’s policy to advance the disclosure of climate-related financial risks, which we will also explore through FSOC. This will complement the work of the SEC, which is currently reviewing existing guidance on climate-related financial disclosures.
Why This Matters
Climate change costs the federal government billions every year. First, it's crucial that the federal government understands its own climate risk, which is the major prescription given by President Biden in his executive order.
As AP reported, Yellen said the US also intended to enlist the support of the International Monetary Fund, the World Bank, and other multilateral development banks to focus more resources on combating climate change. The World Bank and the regional development banks are leading sources of the loans used by poor nations for dams and other development projects.
- She said the administration is backing international efforts to mobilize $100 billion per year from a variety of public and private sources to support efforts by developing countries to combat climate change.
- Yellen said she planned to convene a meeting of the heads of the international lending institutions to discuss ways to better align their efforts with the Paris Agreement.