Financial regulators should act to avoid economic disaster, according to a letter from pension funds and other investors representing almost $1 trillion in assets.
By Christopher Flavelle New York Times
WASHINGTON — Climate change threatens to create turmoil in the financial markets, and the Federal Reserve and other regulators must act to avoid an economic disaster, according to a letter sent on Tuesday by a group of large investors.
“The climate crisis poses a systemic threat to financial markets and the real economy, with significant disruptive consequences on asset valuations and our nation’s economic stability,” reads the letter, which was signed by more than three dozen pension plans, fund managers and other financial institutions that together manage almost $1 trillion in assets.
That financial threat, combined with the physical risks posed by climate change, may create “disastrous impacts the likes of which we haven’t seen before,” the letter says. It urges the Fed, the Securities and Exchange Commission and other agencies to “explicitly integrate climate change across your mandates.”
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Investors worry that if regulators do not act, climate change may cause the price of some companies to fall suddenly, the effects of which may ricochet through the economy. Providing more information about that risk — for example, by requiring companies to disclose more about their greenhouse gas emissions, or which of their facilities are at risk from rising seas — could help investors make better decisions.
That, in turn, might encourage companies to lower their emissions, or risk losing access to investment or affordable insurance coverage. “Every medium and large business has bank loans and has insurance,” said Steven Rothstein, managing director of the Ceres Accelerator for Sustainable Capital Markets, a group that works with investors and which organized the letter.
The letter calls on regulators to adopt the steps Ceres outlined last month in a report that makes 51 recommendations to eight federal agencies. At its core are two demands: that the agencies treat climate change as a systemic risk, and that the S.E.C. ensures mandatory and consistent disclosure of climate threats facing companies.
According to Ceres, regulators can adopt each of its recommendations without new legislation from Congress. Still, during the Trump administration, even agencies that are meant to have a degree of independence from the White House have been reluctant to address climate change. President Trump has called global warming a hoax, and he has reversed nearly 70 environmental rules, with another 30 in progress.
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