Financial Protection

U.S. PIRG to Federal Reserve: Improve your climate risk principles for large banks

U.S. PIRG submitted comments this week on principles proposed by the Board of Governors of the Federal Reserve System (the Fed) for large banks to manage climate-related risks.

Yazan Aboushi | TPIN

The principles were proposed last December, following delivery in October of 60,888 petition signatures collected by U.S. PIRG and other advocates urging principles that require big banks to take climate change seriously.

The principles, similar to those drafted by the Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC), were proposed to provide large banks consistent guidance for managing financial risks related to climate change. The comment period ended on Monday. 

Risks to consumers detailed in the comment letter include loss of reliable and fair products and services, financial losses, and economic instability.

Suggested improvements to the principles, also detailed in the letter, include:

  • Ensure that near-term and mid-term goals add up to achieving a financial institution’s overall goals
  • Require monitoring by a financial institution’s management and board of directors for near-term and long-term climate-related risks
  • Ensure fair access to financial services
  • Reduce financed emissions
  • Ensure that costs of climate change are not offloaded onto consumers

U.S. PIRG also signed onto a coalition comment letter, led by Public Citizen and signed by 67 other organizations.

The coalition letter suggested improvements to the principles, including the following:

  • Ensure public commitments are backed up by internal strategies and credible plans with measurable emissions reduction targets
  • Explain that transition plans reduce transition risk
  • Understand how banks are assessing unreliable offsets as part of their climate commitments
  • Ensure fair access to financial services by recognizing impacts on smaller financial institutions by larger banks
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