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US CFTC Releases “Managing Climate Risk in the US Financial System” Report

Mayer Brown
09/09/2020
Authors:    J. Paul Forrester

On September 9, 2020, the US Commodity Futures Trading Commission (CFTC) released a 197-page report titled “Managing Climate Risk in the US Financial System.” The report, which presents 53 specific recommendations to mitigate the risks to financial markets posed by climate change, concludes that:

  • Climate change poses a major risk to the stability of the US financial system and to its ability to sustain the American economy;
  • Climate-related risks may also exacerbate financial system vulnerabilities that have little to do with climate change, including those caused by a pandemic that has stressed balance sheets, strained government budgets and depleted household wealth;
  • US financial regulators must recognize that climate change poses serious emerging risks to the US financial system, and they should move urgently and decisively to measure, understand and address these risks;
  • Existing statutes already provide US financial regulators with wide-ranging and flexible authorities that could be used to start addressing financial climate-related risks now;
  • Regulators can help promote the role of financial markets as providers of solutions to climate-related risks; and
  • Financial innovation is required not only to efficiently manage climate-related risks but also to facilitate the flow of capital to help accelerate the net-zero transition and increase economic opportunity.