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CFTC Report: Climate Change Threatens Stability of US Financial System

Posted on September 14, 2020
Posted in Environmental, Social, and Governance

A watershed CFTC report highlights the dangers of climate change to the US economy, and provides a broad risk-mitigation roadmap.

By Jean-Philippe Brisson, Paul A. Davies, Nicola Higgs, Yvette D. Valdez, R. Andrew Westgate, Kristina S. Wyatt, and Deric Behar

On September 9, 2020, the US Commodity Futures Trading Commission’s (CFTC’s) Climate-Related Market Risk Subcommittee of the Market Risk Advisory Committee (MRAC) published Managing Climate Risk in the U.S. Financial System (the Report) — a first-of-its-kind publication from a US regulator focusing on the systemic threat that climate change poses to the stability of the US financial system.

The Report is the product of the collaborative effort of the CFTC and a diverse advisory panel of 34 market participants across industries and sectors, including investors; non-governmental organizations; investment banks; academic organizations; and insurance, agriculture, and oil and gas companies.

The Report calls on legislators and market regulators to overcome what it describes as “political inertia” and to take urgent and decisive action commensurate with the risks. To that end, the Report presents a broad range of concrete recommendations, designed to either directly or indirectly mitigate the risks that climate change poses to the US financial markets and long-term economic growth.

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