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Climate change

Federal Reserve, OCC, and FDIC Withdraw Climate-Related Financial Risk Management Principles

Strategic Insights

— 2 min read

The Federal Reserve, Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC) withdrew the interagency Principles for Climate-Related Financial Risk Management for Large Financial Institutions on October 16. The principles, finalized in October 2023, provided guidance on managing climate-related risks and protecting financial stability. The withdrawal has sparked concerns among environmental groups and experts who believe it may undermine efforts to mitigate the financial impacts of climate change.

Key Takeaways:

  • The Federal Reserve, OCC, and FDIC withdrew the interagency Principles for Climate-Related Financial Risk Management for Large Financial Institutions, effective immediately.
  • The principles, finalized in October 2023, provided critical guidance on net-zero commitments and climate scenario analysis to manage physical and transition risks posed by climate change.
  • The withdrawal of the principles has been criticized by environmental groups, including the Sierra Club, which argues that it may lead to another financial crisis like the Great Depression.
  • Economists warn that the financial impacts of climate change could be comparable to the Great Depression but permanent.
  • The principles were designed to promote best practices and help avoid another financial crisis like 2008.
  • The Sierra Club, Public Citizen, and 68 other organizations signed onto a coalition comment letter in support of the principles.
  • The Sierra Club has a long history of advocating for environmental protection and promoting clean energy.
  • The Principles for Climate-Related Financial Risk Management were crafted based on significant feedback during interagency comment periods from 2022 to 2023.

Statistics:

  • 68 organizations signed onto a coalition comment letter led by Public Citizen in support of the principles.
  • The Sierra Club has millions of members and supporters.
  • The principles were finalized in October 2023.
  • The withdrawal of the principles has sparked concerns among environmental groups and experts.

Sources:

  • "Federal regulators in the U.S. and around the world have recognized that climate change poses a destabilizing, systemic threat to the financial system." (Sierra Club)
  • "Economists warn that the financial impacts of climate change could be comparable to the Great Depression, but experienced permanently." (Source: Jessye Waxman, Campaign Advisor with the Sierra Club's Sustainable Finance campaign)
  • "The principles were designed to promote best practices to help avoid another financial crisis like 2008." (Jessye Waxman, Campaign Advisor with the Sierra Club's Sustainable Finance campaign)
  • "The Sierra Club signed onto a coalition comment letter led by Public Citizen and signed by 68 organizations submitted to the Federal Reserve." (Background: Sierra Club applauded the publication of the final principles in October 2023)

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