Report

Commodity Futures Trading Commission: Managing Climate Risk in the U.S. Financial System

Commodity Futures Trading Commission seal

For the first time, a US regulatory agency has forcefully acknowledged the threat of climate change to the economy and made policy recommendations to address it -- all while operating under an administration that denies the existence of the problem. 

The Commodity Futures Trading Commission (CFTC) released a first-of-its-kind report analyzing the systemic risk that climate change poses to the US financial markets and economy. The report, developed by the Climate-Related Market Risk Subcommittee, including energy industry representatives, finds that climate change is a major threat to US markets and makes 53 specific recommendations to lawmakers, regulators, and the financial sector about how to manage this risk.

The Report also concludes that:

  • Climate risks may also exacerbate financial system vulnerability that have little to do with climate change; including vulnerabilities caused by a pandemic that has stressed balance sheets, strained government budgets, and depleted household wealth;
  • U.S. financial regulators must recognize that climate change poses serious emerging risks to the U.S. financial system, and they should move urgently and decisively to measure, understand, and address these risks;
  • Existing statutes already provide U.S. financial regulators with wide-ranging and flexible authorities that could be used to start addressing financial climate-related risk now;
  • Regulators can help promote the role of financial markets as providers of solutions to climate-related risks; and
  • Financial innovation is required not only to efficiently manage climate risk but also to facilitate the flow of capital to help accelerate the net-zero transition and increase economic opportunity.

Adopted by a unanimous vote by the subcommittee on Tuesday, this report marks the first time that a US regulatory agency has so forcefully acknowledged the threat of climate change to the economy and made policy recommendations to address it -- all while operating under an administration that denies the existence of the problem. 

The Commodity Futures Trading Commission is a US regulatory agency whose mission is to promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation.