As Guidehouse has noted in previous posts, regulators overseeing the US financial system under the Biden administration are focusing on climate change. The Department of the Treasury (Treasury) has recently taken concrete steps that reflect its commitment to combating the climate crisis.
On October 7, 2021, Treasury released a Climate Action Plan (CAP) in accordance with Executive Order 14008 to increase the department’s resiliency in the face of climate change. In announcing the CAP, Treasury Secretary Janet Yellen said, “Climate change isn’t just a specter on the horizon … It is a present challenge, and we must adapt.” The CAP, which focuses on internal changes Treasury can make to mitigate climate risks to its operations, consists of five priority action areas:
The CAP’s scope is wide-ranging and includes mitigation of vulnerabilities to physical assets and supply chains, ensuring transparency of climate resilience investments, and education of management and staff on climate risks.These areas of focus internally could form a basis for future guidance to the banking system.
On September 23, 2021, President Biden nominated Cornell University law professor Saule Omarova as comptroller of the currency. Omarova has criticized big banking, and environmental groups have applauded the nomination, anticipating that she will make combating climate risk a priority. In September, acting Comptroller Michael Hsu said the Office of the Comptroller of the Currency was “focused on developing effective climate risk management guidance for large banks, working with our interagency peers,” and Omarova is likely to carry out this agenda if her nomination is approved.
While the Treasury’s CAP does not propose specific regulations for financial institutions, it is a reflection of Treasury’s climate change priorities and could offer insight into how the OCC—particularly under Omarova—might incorporate climate risk into oversight of US banks.