The U.S. Financial Stability Oversight Council (FSOC) announced today the launch of the Climate-related Financial Risk Advisory Committee (CFRAC), aimed at helping the council with identifying, assessing and mitigating climate-related risks to the financial system.
Initial members of the new council represent a broad range of backgrounds, including financial services executives, sustainability disclosure specialists, climate data providers, academics and NGOs, among others.
FSOC’ mandate is to identify risks and respond to emerging threats to financial stability in the U.S. The council is chaired by the Secretary of the Treasury, and brings together federal financial regulators, state regulators and insurance experts. Members of FSCO include the heads of the Federal Reserve, SEC, Federal Deposit Insurance Corporation, and Federal Housing Finance Agency, among others.
Plans to establish the committee were released last year, as part of FSOC’s Report on Climate-Related Financial Risk. The report identified climate change as an emerging and increasing threat to the U.S.’ financial stability, and made a series of recommendations for federal agencies to take action to address the threat, including using scenario analysis to assess climate-related financial risks to financial stability, evaluating the need for new regulations to account for these risks, and enhancing climate-related disclosure.
According to CFRAC’s charter, the new committee’s purpose is to assist FSOC “in gathering information on, conducting analysis of, and making recommendations to identify, assess, and mitigate climate-related risks to the financial system.” Responsibilities of the committee will include gathering and analyzing information on climate-related risks to the financial system, identifying and recommending ways to address information gaps and inconsistencies, and making recommendations on identifying, assessing and mitigating the risks.
Secretary of the Treasury Janet L. Yellen said:
“In establishing this committee, we will leverage the expertise of those outside of government and work collaboratively to improve our collective understanding of how climate change may impact the financial sector. The newly established advisory committee will also ensure that state and federal policymakers hear from leading experts on climate-related financial risks.”
The first meeting of the new committee is anticipated to take place in early 2023. Click here to view a list of CFRAC’s initial members.