May 15, 2020

Warren Urges CFTC Climate Subcommittee to Recommend Strong Market Risk Regulations to Address Threats from Climate Change

Safeguards Against Climate-related Risk Would Reduce Chances of Environmental and Financial Catastrophe

New Tools for Disclosure, Stress Tests, Hedging May Be Needed to Address Threats to Market Stability from Climate Change

Text of Letter (PDF)

Washington, D.C. - United States Senator Elizabeth Warren (D-Mass.), a member of the Senate Banking Committee, yesterday submitted a public comment letter to the Commodity Futures Trading Commission (CFTC) on issues being addressed by the Climate-Related Market Risk Subcommittee of the Market Risk Advisory Committee. Senator Warren urged the Subcommittee to include in its recommendations strong requirements for market regulations to incorporate physical and transition risks associated with the climate crisis. The deadline to submit public comments was Thursday, May 14, 2020.

"While public health officials combat the ongoing coronavirus disease 2019 (COVID-19) pandemic and the federal government addresses the associated economic collapse, we cannot afford to lose sight of climate-related threats to our health and economic well-being," the senator wrote.

The Subcommittee was established to "identify and examine climate change-related financial and market risks, including for derivatives markets," and its report will include "policy recommendations on oversight, including disclosures and stress testing against climate events, as well as ideas for new products for hedging against climate risk." 

Recent studies estimate that climate change may cause "permanent damage that would far eclipse the scale of the 2007-2008 financial crisis." A 2018 report by 13 federal agencies also found that without significant climate action, as much as ten percent of the American economy may be wiped out by 2100. Additionally, a separate report argued climate change may lead to tens of trillions of dollars in global damages and will "universally hurt worker health and productivity." Meanwhile, the Trump administration has exacerbated the climate crisis by weakening safeguards on air pollution, emissions, fossil fuel extraction, and more.

Last year, Senator Warren introduced the Climate Risk Disclosure Act of 2019, which would accelerate the transition from fossil fuels by requiring public companies to disclose critical information about their exposure to climate-related risks. The senator is also an original co-sponsor of the Climate Change Financial Risk Act of 2019, which would create climate risk stress tests for the nation's largest financial institutions.

"The Climate Risk Disclosure Act of 2019 and the Climate Change Financial Risk Act of 2019 ultimately provide a useful framework for the CFTC and the Subcommittee must adapt similar principles as the policies in these bills in its recommendations," the senator continued.

Last month, Senator Warren submitted a comment letter to the Securities and Exchange Commission raising concerns with the agency's amendments to disclosure requirements for public companies, after the SEC declined to require the disclosure of economic risks caused by the climate crisis.

Earlier this year, Senator Warren asked the eight global systemically important banks under U.S. jurisdiction-JPMorgan Chase, Citigroup, Bank of America, Goldman Sachs, Wells Fargo, Bank of New York Mellon, Morgan Stanley and State Street-to provide information about their and the financial industry's climate risks and their practices to mitigate these risks. She has also led her colleagues in urging BlackRock CEO Larry Fink to endorse the Climate Risk Disclosure Act after Mr. Fink publicly announced that BlackRock will "make investment decisions with environmental sustainability as a core goal" and committed to release climate disclosures for the investment firm's mutual funds.