Climate change poses “significant challenges” to the safety and soundness of financial institutions and the stability of the financial sector more broadly, the Federal Reserve said in a statement issued Wednesday.
The Fed assertion was issued in the wake of a declaration issued earlier this week by the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), as part of the international conference (the “Conference of Parties 26” or COP26) held in Glasgow, Scotland, about climate change.
“A sustained global response by national authorities, the international community, and the private sector can address the financial and economic implications of climate change,” the Fed statement asserted. “
The agency said it supports efforts of the NGFS to identify key issues and potential solutions for the climate-related challenges “most relevant to central banks and supervisory authorities.”
“While the primary responsibility for addressing climate change itself rests with elected officials, the Federal Reserve is committed to working within our existing mandates and authorities to address the implications of climate change, particularly the regulation and supervision of financial institutions and the stability of the broader financial system,” the Fed statement said.
The Federal said it would address climate-related risks in an “analytically rigorous, transparent, and collaborative way through our domestic work with other federal agencies.” That includes the Financial Stability Oversight Council (FSOC), the Fed said. The agency indicated that also includes working with the Financial Stability Board (FSB), the Basel Committee on Banking Supervision, the NGFS, “and through our broad and transparent engagement with the private sector.”