At Hearing, Treasury Nominee Agrees with Senator Warren that Addressing Climate Risk Must be a Priority for Treasury
Washington, D.C. - At today's Senate Banking, Housing, and Urban Affairs Committee hearing to consider the nominations of Alan F. Estevez, Thea D. Rozman Kendler, Alexia Marie Gabrielle Latortue, and Graham S. Steele, United States Senator Elizabeth Warren (D-Mass.) highlighted the need for the U.S. Department of Treasury to address climate risk and directed her questions toward Steele, the nominee to be Assistant Secretary of the Treasury for Financial Institutions, who will be in charge of overseeing policy for financial institutions if confirmed.
In responding to Senator Warren about whether banks’ investments in fossil fuels put consumers, our financial system, and our economy at greater risk, Steele affirmatively responded: “I believe that they do.” He added that baseline economic issues “would be exacerbated if we also at the same time had a financial crisis occurring at the same time that we had an economic, a climate-induced economic crisis.”
When asked about the kinds of tools that our regulators have at their disposal to mitigate these risks and ensure our financial system is protected from climate change, Steele told Senator Warren that the Financial Stability Oversight Council, disclosure requirements, and supervisory practices all have an important role to play.
Combatting the climate crisis is one of Senator Warren's highest priorities. Senator Warren recently urged John Morton – the first Climate Counselor at the Treasury’s new Climate Hub – to take swift and aggressive action to tackle the climate crisis. She and Representative Sean Casten (D-Ill.) reintroduced the Climate Risk Disclosure Act, which would require public companies to disclose more information about their exposure to climate-related risks. To speed the transition to clean energy products, Senator Warren and Congressman Andy Levin (D-Mich.) introduced the Buy Green Act to use the purchasing power of U.S. federal procurement to help fight the climate crisis. They also introduced the National Institutes of Clean Energy Act of 2021, legislation that would invest $400 billion over the next ten years in the research and development (R&D) of advanced clean energy technologies. And she unveiled the BUILD GREEN Infrastructure and Jobs Act which would invest $500 billion over ten years in state, local, and tribal projects to jumpstart the transition to all-electric public vehicles and rail and help modernize the nation's crumbling infrastructure.
Transcript: Senate Banking Hearing to consider nominations of
Estevez, Kendler, Latortue, and Steele
U.S. Senate Committee on Banking, Housing, and Urban Affairs
Tuesday, September 21, 2021
Senator Elizabeth Warren: Thank you very much, Mr. Chairman. And congratulations to all of you on your nominations.
The science is clear: climate change is an existential threat to every living thing on this earth. The climate crisis is bearing down on us with accelerating speed. We need bold action now.
Mr. Steele, if confirmed, you will be in charge of the office at Treasury that oversees policy for financial institutions. From your standpoint, do the largest financial institutions directly contribute to the climate crisis?
Graham Steele: Thank you for the question, senator, and I share your concerns about the existential crisis that is climate change. I would say it is difficult to know because there's no standardized reporting right now of financed emissions by financial institutions. And I would also say that a lot of the largest banks have made net zero commitments or commitments to reduce their emissions by 2030, but there's not a lot of there-there, not a lot of details about what they are going to do. What we do know, based upon reports by groups, like Rainforest Action Network using publicly available data, is that the four largest U.S. banks provided $976 billion dollars in financing to the fossil fuel industry over the last five years. So it seems like there's some room for improvement.
Senator Warren: In fact, let me just add to your numbers there. During the past five years following the signing of the Paris Agreement, the world’s biggest banks have put $3.8 trillion into financing fossil fuel exploration, drilling, and trading.
Now, at the same time, some of these very same banks have been patting themselves on the back for announcing meaningless climate pledges. For example, JP Morgan Chase relies on accounting tricks to try to pretend that it has cut the overall greenhouse gas emissions associated with its lending.
This so-called “corporate greenwashing” lets giant banks get these great headlines without doing the serious work that we need to protect our environment. And in some areas of the financial system, the climate-change threats are becoming even clearer. Take cryptocurrency and Bitcoin mining. Proponents of these technologies have praised the innovations in this sector, but one of those innovations has been a brand new way to consume huge amounts of energy for no productive purpose.
So, Mr. Steele, do banks’ investments in fossil fuels put consumers, our financial system, and our economy at greater risk?
Steele: Well, again, senator. I believe that they do. There's one possible risk which is physical risk. The damage caused by increased hurricanes, flooding, wildfires out in my home state of California, cold snaps that leads to shutdown and reduced economic activity. They're the potential economic consequences of a sudden and disorderly transition in energy sources that could devastate communities that rely on particular industries, particularly energy intensive industries.
Finally, I'll also say that even under the status quo, there is a cost to climate vulnerable populations right now. We know that fenceline and frontline communities are damaged by environmentally harmful practices, and I would say that all of those issues -- those baseline economic issues -- would be exacerbated if we also at the same time had a financial crisis occurring at the same time that we had an economic, a climate-induced economic crisis.
Senator Warren: Well, you know the earth’s climate is truly in crisis, but there is good news: we are not powerless here. The administration has already taken important steps with President Biden’s Executive Order on Climate-Related Financial Risk.
So, Mr. Steele, let me ask you. What are some of the tools that our regulators have available right there at their disposal to mitigate these risks and to ensure that our system is protected from climate change?
Steele: Well, senator, as you noted, the president has tasked the Financial Stability Oversight Council with coordinating its constitutive agencies to report back on the work that they're doing through their organic laws that they have to ensure the safety and soundness of the banking system or under the securities laws or the commodities laws. I know that some of them have been incorporating climate risk into the supervisory practices that they are doing. I know you've been a leader on this issue in framing the way that Dodd-Frank and some of the other financial reform laws could be used to address some of these risks. And also on that disclosure issue that I mentioned earlier in proposing a way to standardize the climate risk from public companies. So were I to be confirmed, I'd look forward to working with you and the other Members of the Committee on what that could look like to address the risk of climate change.
Senator Warren: That sounds really good. And I really do think you've identified several very important tools. But I also think it is important that we not just have a piecemeal approach here. Treasury has a major role to play in coordinating among the financial regulators and ensuring that we have a comprehensive approach to these risks.
The time for climate action is now. And I know from your work that you take these issues seriously. I look forward to working with you on these issues when you are confirmed.
Thank you, Mr. Chairman.
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