Global Banking Regulators Reject Trump Administration’s Effort to Gut Climate Risk Oversight, But Weaken Reporting Standards

BASEL, Switzerland - Yesterday, global central bankers with the Basel Committee on Banking Supervision rejecteda Trump administration proposal to weaken the international task force on climate-related financial risks. U.S. officials from the Federal Reserve, New York Fed, Office of Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) reportedlysought to downgrade the task force, reducing attention to climate risks that threaten financial stability.

However, the committee did agree to step backon its plan to publish new guidance on how climate-related financial risks can be disclosed by regulators and banks, shifting those disclosures from mandatory to voluntary. Instead, it will promote voluntary disclosures that will focus only on physical risks associated with climate-driven extreme weather, and avoid addressing transition-related climate risks, which pose systemic financial threats to banks and the global financial system. The committee's backsliding raises questions about whether the new Basel frameworkis up to the task of managing climate-related financial risks, and underscores the overt political influence by U.S. financial regulators.

"U.S. regulators are once again putting political agendas ahead of financial stability by undermining global efforts to manage climate-related risks. Weakening the Basel Committee's focus on transition risks leaves investors, banks, and the broader economy more vulnerable to sudden shocks from stranded assets, supply chain disruptions, and market volatility. Climate change is a systemic financial risk, and regulators turning a blind eye won't make those risks disappear. Global markets deserve serious oversight, not political interference. While other countries are refusing to follow the U.S. down this reckless path, the damage to American credibility and preparedness is already being done," said Ben Cushing, Sustainable Finance Campaign Director at the Sierra Club.

BACKGROUND

The Basel Committee on Banking Supervision set up its climate task force in 2020. It has focused on several reports, including the yet-to-be-released report establishing a global framework for banks to disclose climate risks, and released a set of principles for banks and their supervisors to tackle threats from global warming. The effort to dilutethe global climate financial risk task force and related measures follows Trump's politically-motivated sweeping rollbacksof federal climate policies and initiatives for fossil fuels since taking office.

The costs of climate change to the global economy are staggering - $38 trillionper year by 2049 according to a recent study - and financial institutions could be underestimatinginvestor losses from physical climate risk by as much as 70%. Climate change is already wreaking havoc on the insuranceand housingsectors. Homes and property in the United States may be overvaluedby trillions of dollarsdue to climate risks, potentially triggering a subprime mortgagecrisis. Other central banks have vowedto keep fighting climate change with or without the U.S.

About the Sierra Club

The Sierra Club is America's largest and most influential grassroots environmental organization, with millions of members and supporters. In addition to protecting every person's right to get outdoors and access the healing power of nature, the Sierra Club works to promote clean energy, safeguard the health of our communities, protect wildlife, and preserve our remaining wild places through grassroots activism, public education, lobbying, and legal action. For more information, visit www.sierraclub.org.