The Center for Human Rights and Environment (CHRE) submitted comments this month to The Federal Deposit Insurance Corporation (FDIC) regarding a recently released draft Statement of Principles for Climate-Related Financial Risk Management for Large Financial Institutions, urging the FDIC to advance key climate policies that can rapidly and greatly curb global warming.
The latest climate science indicates that global temperature increases are likely to exceed 1.5˚C during the 2030s and 2˚C by mid-century unless we can rapidly reduce greenhouse gas emissions. Surpassing the 1.5˚C guardrail established by the Paris Agreement could lead to irreversible climate tipping points, after which we face more intense and severe climate impacts. There has never been a more important time to tackle the ongoing climate crisis. An urgent change of course must be the top priority, as every 1/10 of a degree of warming translates to intense increases of climate impacts and to the deepened deterioration of our ecosystems.
In response to the urgent climate crisis, President Biden has made climate protection one of his priorities and promised an “all of government” approach to tackling climate change. Fast-action climate approaches must be reflected in all government agencies to leverage change and effectively tackle the climate emergency. The FDIC, not traditionally thought of as a “climate” or “environmental” regulator, can and must do its part in steering the banking sector to also tackle the climate emergency.
Climate change causing emissions disclosures for the corporate sector are not new, nor are climate risk assessments for corporate assets and investments, even for the banking sector. However, climate risk assessment and related disclosure rules are mostly considered over the long-term, they are generally carbon-centric, and utilize a framework that is suddenly proving insufficient for our rapidly intensifying climate emergency. Recent studies show that benefits of decarbonization will not be reaped for centuries, whereas the latest climate science is telling us that irreversible climate tipping points are only a few decades away. Effectively reducing climate risk is only possible through achieving short-term aggressive reductions of the most intense climate super pollutants, commonly referred to as short-lived climate pollutants or SLCPS. SLCPs include methane, black carbon, HFCs, and tropospheric ozone, which are significantly more potent than CO2 in terms of their climate-forcing impact. Methane, for example, is 86 times more polluting for the climate than CO2 and HFCs can be thousands of times more polluting. For this reason, prioritizing SLCP reductions will cut the rate of global warming in half in the near term, giving the world a fighting chance to avoid imminent climate collapse for present and for future generations.
With this in mind, CHRE urges the FDIC to incorporate a fast climate mitigation approach to climate risk assessment policy and disclosure rules. Climate risk assessment and disclosure rules must conform to this new short-term horizon emergency (by the year 2030) while evaluating whether the most effective and immediate emissions reductions strategies available are being employed. In addition, climate risk assessment and disclosure rules must evaluate and predict to what extent society is promoting strategies and actions that reduce SLCPs alongside reducing CO2. We shouldn’t ignore CO2 as in the long term, they are also needed to stabilize the climate.
CHRE also asks that the FDIC encourage financial institutions to contribute to climate solutions and not be part of the problem. While many companies make significant efforts to reduce their GHG emissions and put aggressive climate policies into place, the financial institutions that hold their deposits may in fact be working at odds with the climate, and through investments, be supporting industries that are the worst polluters, thus aggravating climate risk. The FDIC can help steer a more climate-sustainable pathway for the financial sector. Lastly, CHRE urges the FDIC to incorporate an Environmental Justice dimension into its climate risk assessment policy and disclosure rules since climate change disproportionately impacts disadvantaged communities that have suffered historic discrimination with lacking public policy to thwart the worst impacts of climate change.
The FDIC has important leverage on many of our economy’s largest financial institutions that are large enough to reduce global GHG emissions by considerable amounts. The FDIC and the financial institutions that it regulates also have considerable influence on global markets, allowing the FDIC to gain an opportunity to help steer the financial sector in the United States, and globally, towards a more effective and decisive approach to our escalating climate emergency. Through the promotion of fast mitigation and SLCP-related disclosures, the FDIC can help reduce climate risk and help keep us on the 1.5°C pathway that climate scientists are warning us we should not breach.
Link to CHRE’s Comments submitted to the FDIC: