The Commodity Futures Exchange Commission has called for enhanced disclosure by public companies of climate-related financial risks to help prevent climate change from disrupting the US financial system.
That is one of the findings of a landmark report https://www.cftc.gov/sites/default/files/2020-09/9-9-20%20Report%20of%20the%20Subcommittee%20on%20Climate-Related%20Market%20Risk%20-%20Managing%20Climate%20Risk%20in%20the%20U.S.%20Financial%20System%20for%20posting.pdf by a U.S. Commodity Futures Trading Commission advisory panel convened a year ago by Rostin Behnam, one of two Democrats on the five-member CFTC.
The panel's 35 members, including representatives of Goldman Sachs Group Inc, BP Plc, the Dairy Farmers of America, and The Nature Conservancy among others, approved the report on Tuesday.
"Both physical and transition risks could give rise to systemic and sub-systemic financial shocks, potentially causing unprecedented disruption in the proper functioning of financial markets and institutions", it warns.
Some members, and indeed the regulatory body itself, appeared less than fully supportive, however.
The report's release comes less than two months ahead of the election pitting Republican President Donald Trump, who says climate change is a hoax, against Democratic challenger Joe Biden, who calls climate change an "existential threat".
In a report issued on Wednesday, a CFTC task force said disclosure is "an essential building block to ensure that climate risks are measured and managed effectively".
And because the COVID-19 pandemic has depleted household wealth, government budgets and business balance sheets, the economy is more vulnerable than before, it added, "increasing the probability of an overall shock with systemic implications". These range from establishing a price for carbon to integrating climate risk into fiscal policy.
But the report's dozens of other recommendations amount to a call for a sweeping rewrite of financial market rules and norms that could go forward without any new laws and no matter who wins the presidency.
The task force noted that "Large companies are increasingly disclosing some climate-related information, but significant variations remain in the information disclosed by each company, making it hard for investors and others to understand exposure and manage climate risks".
But while the quality of the disclosed information has improved over the past several years and the number of entities disclosing climate-related information has increased, "the existing disclosure regime has not resulted in disclosures of a scope, breadth, and quality to be sufficiently useful to market participants and regulators", the report said.
Regulators in the United States, where politicians regularly cast doubt on the fact that burning fossil fuels is affecting the earth's climate, have lagged far behind on such work.
The report, "Managing climate risk is the USA financial system", also gives 53 recommendations for how regulators can be better prepared to deal with the risks of global warming and to foster innovation to tackle it.