US senators pressure Treasury to get more aggressive on climate crisis risks

By Andrea Shalal

WASHINGTON (Reuters) -Elizabeth Warren, Bernie Sanders and four other U.S. senators are pressuring the U.S. Treasury Department to step up oversight and offer more guidance to financial institutions on addressing climate change risks threatening the U.S. financial system.

In a letter sent to the Treasury last week, Democratic senators Warren, Martin Heinrich, Edward Markey, Sheldon Whitehouse and Jeffrey Merkley, as well as Sanders, an independent, welcomed the department’s work on the issue so far but called for “added urgency” given increasing risks.

The Treasury should act now – including through its role as head of the multi-regulator Financial Stability Oversight Council (FSOC) – to address systemic risks becoming evident in a crash in coastal property values, insurance market failures, and uninsurable wildfire risks, they said.

“As climate financial impacts grow, the Climate Hub and Treasury must pursue with added urgency all available measures to address the climate crisis and its threat to the stability of our financial system,” the senators wrote in the Sept. 20 letter, which was first reported by Reuters.

A Treasury spokesperson did not respond to any specific concerns raised by the senators, but underscored the department’s commitment to tackling climate change.

“Under Secretary Yellen’s leadership, the Treasury Department has been at the forefront of addressing the climate crisis. From implementing the clean energy provisions of the Inflation Reduction Act to unlocking billions in public and private financing, combating climate change remains a top priority for the department.”

The senators called on Treasury Secretary Janet Yellen and newly appointed climate counselor Ethan Zindler, a climate and clean energy research executive, to do more to protect the U.S. economy from what Yellen has described as the “existential threat” posed by climate change.

Recent climate disasters and financial disruptions have underscored the rising cost and impact of climate change, with one study showing only 40% of direct weather-related costs suffered worldwide in 2022 were covered by insurance providers.

The senators said they were particularly concerned about nonbank financial institutions, which also played a critical role in the 2008 global financial crisis, and said the FSOC should finalize and immediately implement a new analytic risk framework for climate-related financial risks.

The Treasury should also develop better climate risk scenario exercises for banks, and ensure that all FSOC members can access data gathered by Treasury’s Climate Data and Analytics Hub under a pilot project launched in July 2022, they wrote.

The senators welcomed the Treasury’s new voluntary principles for “net-zero” financing commitments, but said there were gaps in the guidance and that the department should make clear all large financial institutions should have a credible transition plan.

They also repeated earlier calls for stronger Internal Revenue Service enforcement of rules on political activity by nonprofit organizations, citing efforts by special interests to fuel climate change denial, and investigations into how such funding could be obstructing more action on the climate crisis.