June 14, 2024

Warren, Casten, Lawmakers Urge Financial Regulators to Stop Obstruction of Efforts to Tackle Climate-Related Financial Risks

“The U.S. prides itself as the gold standard in financial markets, but we are falling behind our peers.” 

Text of Letter (PDF)

Washington, D.C. – Senator Elizabeth Warren (D-Mass.) and Representative Sean Casten (D-Ill.) led a letter to the Federal Reserve Board (Fed), Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), urging regulators to stop their obstruction of global financial regulators’ work to tackle climate-related financial risks. The lawmakers also called out the weaknesses revealed by the Fed’s 2023 “pilot scenario analysis” exploring six major banks’ resilience to climate-related financial risks.

20 lawmakers joined the letter.

Senate signers of this letter include: Edward Markey (D-Mass.), Bernard Sanders (I-Vt.), and Sheldon Whitehouse (D-R.I.). 

House of Representative signers of this letter include: Earl Blumenauer (D-Ore.), Greg Casar (D-Texas), Sean Casten (D-Ill.), Adriano Espaillat (D-N.Y.), Jesus Garcia (D-Ill.), Raul Grijalva (D-Ariz.), Jared Huffman (D-Calif.), Barbara Lee (D-Calif.), Jerrold Nadler (D-N.Y.), Alexandria Ocasio-Cortez (D-N.Y.), Ilhan Omar (D-Minn.), Katie Porter (D-Calif.), Delia Ramirez (D-Ill.), Adam Schiff (D-Calif.), Rashida Tlaib (D-Mich.), and Juan Vargas (D-Calif.). 

Nearly every global financial supervisor agrees that climate-related risks present safety and soundness risks to individual institutions and systemic risks to the financial sector. 

Last month, the Fed released the results from its 2023 pilot Climate Scenario Analysis (CSA), a report meant to inform regulators and the public as to how the nation’s largest banks “are using climate scenario analysis to explore the resiliency of their business models to climate-related financial risks.” Yet, the Fed’s report revealed deep gaps in six large banks’ understanding of the risks posed to them from climate change, including Wells Fargo, Bank of America, and JP Morgan Chase. The banks struggled to properly model and assess climate risk, and some went as far as relying on third-party vendors to provide the relevant data and modeling to make crucial decisions. These findings cast serious doubt on the preparedness of the United States’ banks and financial system for climate-related financial risks.

Further, according to an April 2024 Bloomberg report, European financial regulators have been calling for lenders to “disclose their strategies for meeting green commitments,” only to be met with resistance by leaders at the FDIC, OCC, and Fed. Despite the significant impacts of climate change on insurance markets – leading some insurance companies to hike premiums or withdraw coverage from entire states or portions of states – U.S. regulators have done little to address the climate-related risks to the United States’ insurance system.

“Our lack of progress and innovation in establishing robust measures to address the financial and economic risks from climate change places us behind our international peers and is counterproductive to American interests,” wrote the lawmakers. 

The lawmakers argued that regulating climate-related financial risks is well within the Fed, FDIC, and OCC’s authority and responsibilities. 

“As we drag our feet on even recognizing and modeling the financial risk associated with climate change, our international partners are legions ahead,” the lawmakers continued.

The lawmakers requested an update on the regulators’ actions to combat climate-related risks and sought clarification on the regulators’ obstruction of the development of global financial rules by June 28, 2024. 

Senator Warren has long fought to push financial regulators to act on climate and climate financial risk:

  • In June 2024, Senator Warren and Representative Waters (D-Calif.) led 36 lawmakers in a letter to the Securities and Exchange Commission (SEC) urging the SEC to remain focused on the risk that climate change poses to investors. Among other calls to action, the letter urges the Commission to enforce its existing climate risk guidance and rules while its final climate risk disclosure rule is stayed, use every resource available to combat the legal challenges the rule is facing, and robustly implement the rule once the stay is lifted. 
  • In May 2024, Senator Warren (D-Mass.), alongside House Representatives Levin (D-Calif.) and Schiff (D-Calif.), sent a letter to the Federal Insurance Office (FIO) and the National Association of Insurance Commissioners (NAIC) urging them to ensure comprehensive and transparent data collection to understand and address the impact of climate change on property insurance premiums. 
  • In April 2024, Senator Warren, and Representatives Casten (D-Ill.) and Escobar (D-Texas) led a letter to the Federal Acquisition Regulation (FAR) Council, composed of the Department of Defense (DoD), General Services Administration (GSA), and the National Aeronautics and Space Administration (NASA), urging them to finalize the Federal Supplier Climate Risks and Resilience Rule as quickly as possible.
  • In March 2024, Senators Warren and Sheldon Whitehouse (D-R.I.) sent a letter to Chair Powell, expressing concerns about the damaging impact of the Fed’s extreme 2022 and 2023 interest rate hikes, which have halted deployment of clean energy technologies and have undermined the Inflation Reduction Act’s climate and consumer benefits. The senators called on the Fed to cut interest rates to allow for continued progress on clean energy projects and the climate and economic benefits they provide. 
  • In March 2024, Senator Elizabeth Warren (D-Mass.), released a statement describing the Securities and Exchange Commission’s (SEC) finalized climate risk disclosure rule as “the bare minimum.” 
  • In January 2024, during a Senate Banking Committee hearing, Senator Warren called for the Biden Administration to swiftly finalize its data call about the effects of climate change on the insurance market—and to collect all the data necessary to understand our gaps in insurance coverage and the right regulatory response. 
  • In September 2023, Senators Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.), Martin Heinrich (D-N.M.), Ed Markey (D-Mass.), Sheldon Whitehouse (D-R.I.), and Jeff Merkley (D-Ore.) sent a letter to Secretary of the Treasury Janet Yellen and newly-appointed Treasury Climate Counselor Ethan Zindler, urging the Treasury Department (Treasury) to take key actions pertaining to climate and climate-related financial risk to avert the impending environmental and economic crises.
  • In September 2023, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren urged Chair Gensler to quickly finalize a strong climate risk disclosure rule, reminding him that he has a mandate to protect investors and strong public support.
  • In September 2023, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren highlighted the recent withdrawals of major insurance companies from states that have a high and growing  risk of climate disasters, the impact of this insurance crisis on homeowners, and the need for increased transparency from insurance companies.
  • In September 2023, Senators Warren, Chris Van Hollen (D-Md.), and Whitehouse sent a letter to Secretary Yellen and Federal Insurance Office (FIO) Director Steven Seitz calling on the FIO to finalize its proposal to collect data from major insurers to better assess the impact of climate change on insurance availability and affordability, including in communities that are most vulnerable to the effects of climate change.
  • In March 2023, Senators Warren, Whitehouse, and Markey sent a letter to Secretary Yellen following Climate Counselor John Morton’s departure and urging Treasury to take swift and aggressive action to tackle the climate crisis, which threatens our health, security, and financial system. 
  • In March 2023, Senators Warren, Whitehouse, and Representatives Dan Goldman (D-N.Y.) and Raskin and 47 of their colleagues sent a letter to SEC Chair Gary Gensler, urging him to protect investors and finalize a strong climate disclosure rule without further delay.
  • In September 2022, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren called on SEC Chair Gary Gensler to protect investors and stand up to fossil fuel lobbying by issuing a strong climate risk disclosure rule quickly.
  • In June 2022, Senator Warren led a comment letter with Senators Whitehouse and Brian Schatz (D-Hawaii) on the SEC’s mandatory climate disclosure rule, highlighting several areas for improvement and key elements that the SEC should preserve in its final rule, including strong Scope 3 emissions disclosure requirements.
  • In March 2022, Senator Warren led a letter with Senators Whitehouse and Schatz urging the SEC to require disclosure of anti-climate lobbying activities in the Commission’s rule.
  • In February 2022, Senator Warren led a letter to the SEC about the delayed release of the SEC’s proposed climate change disclosure rule, urging them to act quickly to get a rule out.
  • In August 2021, Senators Warren, Kirsten Gillibrand (D-N.Y.), and Chris Van Hollen (D-Md.) sent a letter to John Morton – the first Climate Counselor at the new Climate Hub at the U.S. Department of the Treasury – urging swift and aggressive action to tackle the climate crisis, a major threat to the country’s health, security, and financial system.
  • In May 2021, Senator Warren and Congressman Andy Levin (D-Mich.) introduced the Buy Green Act to use the enormous breadth of U.S. federal procurement to help fight the climate crisis, spur innovation, and boost demand for American-made clean energy products at home and in the rapidly-growing markets for green products abroad.
  • In April 2021, Senator Warren and Representative Sean Casten (D-Ill.) reintroduced the Climate Risk Disclosure Act of 2021 which would reduce the chances of environmental and financial catastrophe by requiring public companies to disclose more information about their exposure to climate-related risks.

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