US regulatory supergroup establishes climate risk committee

ISSB special adviser and Bob Litterman among 20-strong climate committee announced by US Treasury’s Financial Stability Oversight Council.

The Financial Stability Oversight Council (FSOC), the regulatory supergroup created after the financial crisis to monitor risks to the US financial system, has announced the launch of a dedicated climate risk committee.  

The FSOC is chaired by US treasury secretary Janet Yellen and includes among its members heads of the nation’s most powerful financial regulators, including Federal Reserve chair Jay Powell and the head of the Securities and Exchange Commission, Gary Gensler. 

Yesterday, members approved the creation of the Climate-related Financial Risk Advisory Committee (CFRAC) and its charter.  

Inaugural members of the new body include ex-Goldman heavyweight Bob Litterman and Janine Guillot, the former CEO of the Value Reporting Foundation (VRF), who is now special adviser to the International Sustainability Standards Board. 

Litterman, founding partner of investment firm Kepos Capital, served as chair of the Commodity Futures Trading Commission’s climate risk body, which delivered its report to the financial regulator in September 2020. That report stated that establishing a price on carbon was the “single most important step” the US must take to tackle climate risks and “drive the appropriate allocation of capital”.

CFRAC has been charged with helping the FSOC “identify, assess and mitigate climate-related financial risks to the financial system”.   

Plans to establish CFRAC were revealed in the FSOC’s 2021 report on climate risks, delivered to President Biden in October.  

Other members of CFRAC include Wendy Cromwell, head of sustainable investment at Wellington Management; Catherine Ansell, executive director, climate risk at JPMorgan Chase; and Ivan Frishberg, chief sustainability officer at Amalgamated Bank. 

The climate body’s charter includes “identifying gaps and data inconsistencies” and “gathering and analysing information on climate-related risks to the financial system” among its duties.  

CFRAC members will serve terms of one to three years and will meet twice a year, with the first meeting slated for early 2023.  

“Assessing climate-related financial risk is a complex and important task, and I am grateful for the willingness of this committee to take on this work,” Yellen said in a statement.  “In establishing this committee, we will leverage the expertise of those outside of government and work collaboratively to improve our collective understanding of how climate change may impact the financial sector.” 

The US Treasury also revealed on Monday that it hosted a discussion last week with big US banks – including Citi, Goldman Sachs, JPMorgan – to explore their efforts around net zero.