U.S. Fed sets up panels to assess climate-related financial risks: official

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WASHINGTON, March 23 (Xinhua) — The U.S. Federal Reserve has created two new panels to assess climate-related financial risks as climate change could cause severe economic and financial impacts, a senior Fed official said Tuesday.

“Financial market participants that do not put in place frameworks to assess and address climate-related risks could face significant losses on climate-sensitive assets caused by environmental shifts, by a disorderly transition, or both,” Fed governor Lael Brainard said in the remarks to a climate change conference via webcast.

“Given the implications of climate change for both individual financial institutions and the financial sector as a whole, we need a framework that incorporates both microprudential and macroprudential considerations,” she said.

A newly-created Supervision Climate Committee will focus on identifying financial risks from climate change and developing an appropriate program to ensure the safety and soundness of financial institutions, while a new Financial Stability Climate Committee will identify, assess and address climate-related risks to financial stability, Brainard said.

The two panels form the core pillars of the Fed’s new framework for addressing the economic and financial consequences of climate change, the Fed official said, adding that the central bank is also investing in new research, data and modeling tools to study climate-related risks.

Robust risk management, scenario analysis and other tools could help ensure the financial system is resilient to climate-related risks and well positioned to support the transition to a sustainable economy, she noted.

“We are committed to building our capacity to understand and address the risks, complexities, and challenges related to climate change within the Federal Reserve’s responsibilities,” Brainard said, adding that the Fed also recognizes the benefit of collaborating with other regulatory agencies, central banks and international standard-setting bodies. Enditem

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