On August 19th, U.S. Representative Mike Levin (D-CA) and Senator Brian Schatz (D-HI) led a bicameral letter with nearly 50 House members and nine Senators calling on Treasury Secretary Steven Mnuchin to respond to the serious threat climate change poses to financial markets. The letter calls on Secretary Mnuchin to use his statutory responsibility as Chair of the Financial Stability Oversight Council (“FSOC”) to “respond to emerging threats to the stability of the United States Financial System,” noting that the FSOC’s failure to address climate-related risks has left the “the financial system and economy vulnerable” to a severe crisis.
The letter claims that climate change has never been “an agenda topic at an FSOC meeting,” that the FSOC has failed to issue “any recommendations to regulators or Congress on ways to mitigate the financial stability threat posed by climate change,” and that rather than “integrating climate risk as a factor when considering whether to designate a nonbank financial company as systemically important,” the FSOC has instead “shelved the designation authority altogether.”
The letter also highlights that “size, scale, and scope of both physical-and transition-related risks make climate change a textbook systemic risk,” and expresses the concern that if “the financial system is not prepared to withstand these risks safely, a climate shock could seriously disrupt the financial system.”
The full letter is available here.