The U.S. Federal Reserve has asked lenders to start providing information on the measures they are taking to mitigate climate change-related risks to their balance sheets, according to four people with knowledge of the matter.
A child passes by the Marriner S. Eccles Federal Reserve Board Building on Constitution Avenue, NW, on Monday, April 26, 2021.The U.S. Federal Reserve has asked lenders to start providing information on the measures they are taking to mitigate climate change-related risks to their balance sheets, according to four people with knowledge of the matter.
Fed officials have previously said they are considering a new scenario analysis to help them understand how climate change may affect trillions of dollars' worth of bank assets, but have not said how or when they would start to apply such tests. That analysis includes testing the geographical exposure of bank assets to physical risks such as flooding, drought and wildfires, as well as testing exposures to different sectors, such as how oil and gas loans may perform versus renewable energy loans.
In a 2020 report, a Commodity Futures Trading Commission panel cited data estimating that $1 trillion to $4 trillion of global wealth tied to fossil fuel assets could be lost. Fed Chair Jerome Powell has said the agency will tread carefully and focus on incorporating climate change into existing regulatory obligations, as opposed to creating strict new rules. It is unclear, though, if he will be renominated to lead the Fed after his term expires next year, while his vice chair Randal Quarles, a Republican appointee who oversees bank regulation, is expected to leave this year.