Gabby Brown, gabby.brown@sierraclub.org
Washington, DC -- Today, the Financial Stability Oversight Council (FSOC), led by Treasury Secretary Janet Yellen, released a highly anticipated report laying out recommendations for mitigating climate risks to the economy, as directed by President Biden’s May Executive Order.
The report affirms the serious risk the climate crisis poses to our financial system and emphasizes that regulators have the authority and obligation to address it. It also acknowledges the need for policy responses which address the disproportionate climate impacts on vulnerable communities. It lays out important steps financial regulators can take in the near term, including the need for corporate disclosure of climate risks, supervisory guidance for financial firms on how to manage those risks, and more.
However, the FSOC report fails to include key tools to limit Wall Street’s risky investments in the fossil fuels that are driving the climate crisis and threatening the stability of the financial system. The report does not mention that banks are increasing climate-related financial risk by financing the expansion of the fossil fuel industry: in the years following the Paris Agreement, the largest US banks have been the largest fossil fuel funders in the world.
The Sierra Club and other organizations have delivered more than 40,000 petitions to Secretary Yellen, as well as a letter from nearly 40 organizations calling for the report to highlight the gravity of climate threats to our financial system and to identify concrete steps financial regulators can take to address fossil fuel finance as the primary driver of systemic climate risk. Organizations including Public Citizen and Americans for Financial Reform and Evergreen Action have also laid out detailed recommendations for what should be included in the FSOC report.
In response, Sierra Club Fossil-Free Finance Campaign Manager Ben Cushing released the following statement:
“This report makes it clear that financial regulators understand the need for action to ensure that the climate crisis doesn’t cause the next financial crisis. However, by leaving out key risk-reduction tools, it is not treating the problem with the urgency it deserves. Secretary Yellen’s report lays out preliminary steps to make the financial industry more transparent and accountable for their growing climate risks, but it’s also a missed opportunity to recommend actions that actually reduce climate risk and limit Wall Street’s toxic investments in the fossil fuels that are driving the crisis.
“Financial regulators can and must act to rein in Wall Street’s contributions to the climate crisis, which threaten our financial system and the small businesses, pensions, communities and families that depend on it. This report is a step in the right direction, but bolder action from regulators is necessary in order to protect our economy from the climate crisis.”
About the Sierra Club
The Sierra Club is America’s largest and most influential grassroots environmental organization, with millions of members and supporters. In addition to protecting every person's right to get outdoors and access the healing power of nature, the Sierra Club works to promote clean energy, safeguard the health of our communities, protect wildlife, and preserve our remaining wild places through grassroots activism, public education, lobbying, and legal action. For more information, visit www.sierraclub.org.