“Climate change poses a major risk to the stability of the U.S. financial system and to its ability to sustain the American economy,” the US Commodity Futures Trading Commission’s climate subcommittee wrote.
Behnam, the Democratic CFTC commissioner, is hoping the broad involvement of trade in Wednesday’s report will change the tone from the administration.
“It’s incumbent on policy makers, elected officials and regulators to start building in rules about climate resilience so we don’t suffer in the long run from these dramatic weather events,” Behnam instructed CNN Business on Wednesday. “These are real world climate events happening on a more frequent basis and more extreme manner.”
Jobs, earnings and alternative at stake
The report warns of potential “financial system stress” that could harm the economic system by limiting entry to credit score.
“Over time, if significant action is not taken to check rising global average temperatures,” the report stated, “climate change impacts could impair the productive capacity of the economy and undermine its ability to generate employment, income, and opportunity.”
Environmental teams concerned within the report pressured the pressing want for motion.
“For such a politically and sectorally diverse group to issue such a strong call for regulatory action is testament to just how serious a systemic financial threat climate change poses to US capital markets, and how concerned stakeholders from across the political spectrum are about it,” Mindy Lubber, CEO of sustainability nonprofit Ceres, stated in a press release.
CFTC Chairman Heath Tarbert, a Republican, struck a special tone on the report, emphasizing the potential disruption brought on by the shift to cleaner power.
“The subcommittee’s report acknowledges that ‘transition risks’ of a green economy could be just as disruptive to our financial system as the possible physical manifestations of climate change, and that moving too fast too soon could be just as disorderly as doing too little too late,” Tarbert stated in a press release.
Climate disaster could change into a monetary one
The report suggests the climate disaster could finally flip right into a monetary disaster.
“Climate change could pose systemic risks to the US financial system,” the report stated.
That could occur by a “disorderly repricing of assets” that has “cascading effects” on funding portfolios and stability sheets. And these impacts could be amplified by the truth that Corporate America is sitting on file quantities of debt, which could go away some industries susceptible to a shock.
Another threat is that climate change sparks “sub-systemic shocks,” the report stated, that influence specific sectors and geographical areas.
Other studies, exterior of the federal authorities, have equally warned of dire economic penalties from climate change.
The CFTC climate subcommittee laid out 53 suggestions for coping with the climate threat, together with requiring corporations to reveal particulars on greenhouse fuel emissions, piloting climate stress exams, and forcing banks to handle climate change monetary dangers.
The report additionally urged regulators to include climate dangers into their mandates — together with the Financial Stability Oversight Council, which is charged with figuring out rising threats to monetary stability.
Markets are unprepared for climate threat
But the CFTC climate subcommittee emphasised that the “single most important step to manage climate risk” is for the United States to set a “fair, economy-wide and effective” worth on carbon. The aim can be to steer capital in direction of clear power and be sure that markets are appropriately pricing the disruption brought on by climate change.
“Financial markets today are not pricing climate risk. The financial markets cannot do that on their own,” Bob Litterman, chairman of the CFTC climate subcommittee, stated within the report. “Until this fundamental flaw is fixed, capital will flow in the wrong direction.”
The report known as on Congress to impose a worth on carbon and create different acceptable incentives to battle the climate disaster.
“Only then will the awesome power of the financial system be able to address at scale this existential threat,” Litterman stated.