Litterman-led climate body asks for market feedback as it prepares to advise US regulators

A group of climate risk experts led by ex-Goldman heavyweight Bob Litterman is calling for feedback as it prepares to advise financial regulators in the US. 

The 35-strong group, formally known as the Climate-Related Market Risk Subcommittee, was set up by the US Commodity Futures Trading Commission (CFTC) last November and tasked with helping it, and other regulators, manage climate risk. Members include former California Insurance Commissioner Dave Jones, Ceres President Mindy Lubber, UK green finance leader Ben Caldecott, Head of Stewardship at Vanguard Adrienne Monley and Herve Duteil, Chief Sustainability Officer for BNP Paribas Americas.

Now, it is asking for the views of other experts and market participants as it finalises its advice, which is due to be published on June 24 in a report expected to run to around 100 pages. RI understands the report will be equally split between identifying areas of climate risk and providing detailed recommendations on how the CFTC can address such risks. 

The regulator-driven initiative is the first of its kind in the US, as the country seeks to close the gap with other jurisdictions on sustainable finance – in particular the EU, which has made the most concerted push for leadership through its Action Plan on Sustainable Finance. 

The UK, Canada, Australia, Germany, Japan and Malaysia are among others to develop national strategies on sustainable finance. The International Standards Organisation is also working on sustainable finance guidelines to serve as a reference for market participants and regulators, and IOSCO has recently announced a taskforce on the topic. 

Germany’s Interim Report for its Sustainable Finance Strategy is currently open for market feedback until May 3.

According to the original brief given by the CFTC, which regulates the US derivatives market, the subcommittee will identify challenges in managing climate risk and ways to bolster scenario analysis, reporting and governance efforts. It will also make policy and best practice recommendations to improve climate-related financial disclosures.

But despite being convened by the CFTC, the committee’s recommendations will be aimed at the US financial ‘regulatory community’ at large and will not name any one regulator. Last year, US Federal Reserve Governor Lael Brainard said that the institution was “particularly eager” to learn from the committee’s observations.

Commenting on its ongoing work, Subcommittee Chair Bob Litterman said to RI: “So far, there has been a gratifying degree of consensus among subcommittee members on the incentives needed to ensure the financial sector takes appropriate steps to manage the risks associated with climate change".

Upon the report’s completion, it will be presented to the CFTC’s Market Risk Advisory Committee – the Subcommittee’s convening authority – at which point it will be made public by the CFTC, and particular recommendations can be taken forward by individual regulators.