September, 29 2022, 02:38pm EDT
For Immediate Release
Contact:
Ginny Cleaveland, Deputy Press Secretary, Fossil-Free Finance, Sierra Club, ginny.cleaveland@sierraclub.org, 415-508-8498
Federal Reserve's Climate Pilot for Banks a Promising Start in Effort to Rein in Wall Street's Risky Behavior
Agency to launch climate scenario analysis exercise in early 2023 to allow better measurement, management of climate-related financial risks.
WASHINGTON
Today the country's most powerful financial regulator, the Federal Reserve, announced that six of the nation's largest banks will participate in a pilot climate scenario analysis exercise designed to allow better measurement and management of climate-related financial risks.
The banks in the pilot exercise are Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo. The pilot will be launched in early 2023 and is expected to conclude at the end of the year.
The Fed's announcement follows guidance released earlier this year from the Office of the Comptroller of the Currency (OCC) and Federal Depository Insurance Corporation (FDIC) detailing their expectations for how big banks must respond to climate risks.
The Sierra Club's Fossil-Free Finance campaign called the news a promising starting point in the urgent effort to rein in Wall Street's harmful practices that are driving climate change and destabilizing our economy. The Sierra Club and Rainforest Action Network's annual Banking on Climate Chaos report reveals that US banks are some of the biggest financiers of fossil fuels in the world.
"The climate crisis already affects financial institutions and the broader economy, but banks are seriously unprepared to respond and adapt. In fact, big banks still pour billions into fossil fuels, ignoring the serious risks posed by climate change and threatening the savings of everyday Americans in the process. As the country's most powerful financial regulator, the Federal Reserve is finally sending a strong signal to banks to start taking climate risk seriously and prepare for the clean energy transition. This is a promising first step in the urgent effort to rein in Wall Street's dangerous and reckless behavior and protect our financial system from a climate-driven economic crash," said Adele Shraiman, Campaign Representative in the Sierra Club's Fossil-Free Finance campaign.
As America's central bank and most powerful financial regulator, the Federal Reserve is responsible for fighting inflation, promoting full employment, and keeping our financial system stable. The agency also has a legal mandate to respond to emerging threats, like climate change, that could have severe impacts on the stability of our financial system if left unchecked.
As the US grapples with another summer of extreme weather -- soaring temperatures, intense droughts, scorching wildfires, and flash floods -- it's becoming increasingly urgent for our financial regulators to use their authority to adequately prepare for the ways the climate crisis will threaten our financial system.
Read more in this Sierra Club articles that outlines next steps for the Federal Reserve -- including stress tests with climate considerations and higher capital requirements for high-carbon assets -- and how the pilot exercise can help prevent another 2008 crash: Major US Financial Regulators Move to Protect Financial System From Climate Risk.
The Sierra Club is the most enduring and influential grassroots environmental organization in the United States. We amplify the power of our 3.8 million members and supporters to defend everyone's right to a healthy world.
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