Demanding action from industries and government, a top federal regulator warned this week that the human-caused climate emergency poses a threat to the economy which rivals the subprime mortgage meltdown that led to the 2008 financial crisis.
"As most of the world's markets and market regulators are taking steps towards assessing and mitigating the current and potential threats of climate change, we in the U.S. must also demand action from all segments of the public and private sectors, including this agency."
—Rostin Behnam, CFTC
Rostin Behnam is part of the five-member Commodities Futures Trading Commission, an independent federal agency. As the sponsor of CFTC's Market Risk Advisory Committee, he convened a public meeting Wednesday to discuss climate-related financial threats and the formation of a panel to produce a report which reviews those threats and offers solutions.
"As most of the world's markets and market regulators are taking steps towards assessing and mitigating the current and potential threats of climate change, we in the U.S. must also demand action from all segments of the public and private sectors, including this agency," Behnam said in his opening statement Wednesday.
"The impacts of climate change affect every aspect of the American economy—from production agriculture to commercial manufacturing and the financing of every step in each process," he continued. "Any solutions seeking to address and mitigate climate risk must be equally focused on ensuring the safety and continued prosperity of our urban cores and rural communities. Failing to address financial market risks associated with climate change will impede economic growth, and most likely hit rural communities the hardest."
Behnam pointed to extreme weather that scientists say is exacerbated by the climate crisis, from the heightened threat of wildfires in Northern California to catastrophic floods following heavy rainfall in the Midwest this spring, which could have a long-term negative impact on both farmers and food prices. "I believe it is time to examine the relationship of these terrible, and sadly, more frequent events, to financial market risk and more generally, market stability," he said.
The commissioner's comments at the meeting echoed his interview with the New York Times from earlier this week.
"If climate change causes more volatile frequent and extreme weather events, you're going to have a scenario where these large providers of financial products—mortgages, home insurance, pensions—cannot shift risk away from their portfolios," Behnam told the Times. "It's abundantly clear that climate change poses financial risk to the stability of the financial system."
Federal official thinks climate crisis poses as severe a risk to the ecomy as '08 meltdown. (Not to mention the risk to everything else) https://t.co/Il08B09od6— Bill McKibben (@billmckibben) June 12, 2019
Behnam was appointed by President Donald Trump to a CFTC seat that legally must be filled by a Democrat, the newspaper noted—and the forthcoming report he initiated will likely put his agency at odds with an administration that caters to the polluting industries driving the climate crisis.
Because the report, expected late this year or early next, would be a product of the federal government, it would most likely put Mr. Behnam in direct conflict with the policies of the Trump administration. The report, which Mr. Behnam said he expected would focus in particular on potential harm to the nation's agriculture sector, is likely to emerge at a moment when Mr. Trump will be making the case to farm states, which have already been hurt by his crop tariffs, to re-elect him in 2020.
Though Behnam efforts and the panel's recommendations may not be welcomed by the Trump administration, Democratic Sens. Brian Schatz (Hawaii) and Sherrod Brown (Ohio)—both members of the Senate Banking Committee—thanked the commissioner for his leadership on climate in a letter Wednesday.
"Climate change impacts are likely to exacerbate market volatility, erode investor confidence, and increase the risk of financial crashes," the senators wrote. "We strongly support your decision to assess climate-related risks to our financial markets and the impact on the stability of the global financial system. We encourage you to reach out to other financial regulatory agencies to urge them to follow your lead. We also encourage you to engage with the group of 36 international central banks and bank supervisors working together to develop analytic tools to assess climate-related financial risks."
"All of our financial regulatory agencies and Congress must work together to build resilience to this looming threat in our economy and financial markets," they concluded. "We look forward to working with you on this going forward."