Treasury Secretary Janet Yellen testifies before Congress in 2016 during her tenure as Federal Reserve chair. Federal Reserve photo

U.S. financial regulators on Thursday approved a series of steps toward addressing the dangers that climate change poses to the nation’s financial system.

The Financial Stability Oversight Council, which is headed by Treasury Secretary Janet Yellen and includes Federal Reserve Chairman Jerome Powell, acknowledged in a report that climate change is a serious economic threat.

“Climate-related impacts in the form of warming temperatures rising sea levels, droughts, wildfires, intensifying storms and other climate related events are already imposing significant costs upon the public and the economy,” the council’s 133-page report says. “It is the responsibility of the council and its members to ensure the financial system’s resiliency to climate related risks.”

The report includes more than 30 proposals aimed at improving efforts to the assess risks. It put forward recommendations to upgrade the collection of risk data and also ways of making sure the public has access to the data.

The report was released 10 days before a United Nations conference on climate change in Glasgow, Scotland. It signals the Biden administration’s intention to tell the broader international community that it is putting together the policy architecture to address climate change and improve the resilience of financial markets.

With the United States lagging behind the European Union and the United Kingdom in responding to climate change’s economic threats, the administration hopes to use the report to assert more leadership on the issue.

As recommended by the report, a special advisory committee would be established of scientists, Wall Street executives, business and labor leaders, environmentalists and others to help develop standards for monitoring the economic impacts of climate change.

The report also advises identifying and filling gaps in data for assessing how climate change could threaten the economy, including the sharing of data across the federal government and with international counterparts.

The council approved creation of two climate advisory panels that will report to the group on a regular basis to keep officials informed of progress being made.

Companies and government agencies would also have new standards for public disclosures about the climate, a move designed to make it easier for the markets to appropriately weigh the impacts of climate change and the potential savings from reducing those impacts through measures like the use of renewable energy.

Yellen called the changes approved by FSOC an “important first step” but said they were by no means the end of the group’s effort to better incorporate the assessment of climate threats into the regulatory process.

She said the severe weather events of this summer from the wildfires in the West to Hurricane Ida along the Gulf Coast demonstrated the need for action.

Powell, calling climate change a “significant challenge for the global economy and the financial system,” said the Fed was committed to doing its part in such areas as using more sophisticated analyses to better assess climate risks.

Yellen has made addressing climate change a top priority since joining the Biden administration.

Environmental groups, however, said they were disappointed that the FSOC did not make more ambitious recommendations.

“Financial regulators can and must act to rein in Wall Street’s contributions to the climate crisis,” said Ben Cushing, the manager of the Sierra Club’s fossil-free finance campaign. “This report is a step in the right direction, but bolder action from regulators is necessary in order to protect our economy from the climate crisis.”

FSOC is an umbrella panel made up of the heads of the government’s top financial regulatory agencies. It was created by Congress in 2010 to address serious problems in coordination between agencies that had been revealed by the 2008 financial crisis.

The report and its recommendations were approved by all members of the panel with the exception of Jelena McWilliams, the head of the Federal Deposit Insurance Corp., who abstained on the grounds she felt more information was needed before reaching a conclusion. McWilliams was appointed to the FDIC by then-President Donald Trump.

FSOC Endorses Efforts to Address Climate Risks

by The Associated Press time to read: 3 min