DearColleague.us

Letter

Mike Levin

From the office of:

Mike Levin

Sending Office: Honorable Mike Levin
Sent By:
Alison.Feinswog@mail.house.gov

        Request for Signature(s)

Dear Colleague,

Please join me in urging the Federal Reserve to join the Network for Greening the Financial System (NGFS) as an active member.

Climate change poses a growing risk to our financial institutions. It will create physical risk, or direct financial losses, by destroying property, real estate, and other physical assets. More frequent floods, fires, and hurricanes will create losses for
insurance companies, banks, and other financial entities with a vested interest in damaged or destroyed assets.[1] Our financial institutions will also have to prepare for the losses associated with transitional
risks to a low-carbon economy—for example, the impact to oil reserve values as government policies and changing consumer preferences weaken future oil demand.

In December 2017, eight central banks and supervisors recognized these risks and established the NGFS to “help strengthening the global response required to meet the goals of the Paris agreement and to enhance the role of the financial system to manage risks
and to mobilize capital for green and low-carbon investments in the broader context of environmentally sustainable development.”[2] The Network now includes 65 members, including the central banks of Mexico, Canada,
China, Germany, and most European countries.

As U.S. Financial regulators are falling behind their international peers, this letter asks the Federal Reserve to join the NGFS as an active member. It details the systemic risk climate change poses to our financial institutions, and the ways in which United
States financial institutions have exposed themselves to even greater risk by investing in fossil fuel companies.

If you would like to sign onto this letter or have any questions, please contact Alison Feinswog (alison.feinswog@mail.house.gov) in Rep. Levin’s office or Calli Shapiro (calli.shapiro@mail.house.gov)
in Rep. Casten’s office.

Sincerely,

                                                             

 

Mike Levin                                                                                             Sean Casten

Member of Congress                                                                           Member of Congress

 

 

 

April X, 2020

 

Jerome H. Powell

Chair of the Board of Governors

Federal Reserve

20th Street and Constitution Avenue N.W.

Washington, D.C., 20551

 

Dear Chairman Powell:

We write to urge the Federal Reserve to join the Network for Greening the Financial System (NGFS) as an active member.

In October 2018, the United Nations Intergovernmental Panel on Climate Change (IPCC) released a report detailing the grave and imminent danger of failing to act immediately on climate change. The report found that we must limit global warming to 1.5°C to
avoid catastrophic sea level rise, polar ice cap melting, and habitat destruction. Without rapid, unprecedented changes to all sectors of society, we will not be able to limit global warming to 1.5°C.[3]

Climate change poses a systemic risk to our financial institutions, which will have to address the physical risks from extreme weather events and the transition risk associated with greenhouse gas emissions reductions. In 2019, there were 14 weather events
that cost over $1 billion each in the United States, a significant increase over the annual average of 6.5 events between 1980 and 2019.[4] These events will multiply as our planet warms and cause even greater
economic losses. In addition, the IPCC estimates that energy-related investments will have to reach $830 billion to limit warming to 1.5°C.[5] However, the cost of reducing emissions will be much lower than the
costs of a world with 2.0°C warming, as more extreme weather will damage property, crops, and other assets.[6]

Banks in the United States have exposed themselves to even greater risk by investing in the industries that will exacerbate the physical risk of climate change. Between 2016 and 2019, four American banks financed over $800 billion in fossil fuel investments,
30 percent of all global fossil fuel financing.[7] Banks will also suffer losses with mortgages, agricultural loans, and commercial real estate from increased frequency of fires, floods, and hurricanes.[8] 

In response to these threats, eight central banks established the NGFS in December 2017 to meet the goals set forward in the Paris agreement. These countries acknowledge that “climate-related risks are a source of financial risk. It is therefore within the
mandates of central banks and supervisors to ensure the financial system is resilient to these risks.”[9] Today, there are 65 active members, including the central banks of Canada, China, Germany, and most European
countries.

After seeing the impact that the spread of COVID-19 has had on our nation’s financial system, we believe it is more important than ever to prepare for future external shocks. However, the COVID-19 pandemic will end, and we will be able to begin recovery
and rebuild our economy. Climate change, on the other hand, is fundamentally changing the risks our financial system will have to face over the decades to come.

We are encouraged that the Federal Reserve has expressed interest in joining the NGFS. In her remarks at the Federal Reserve of San Francisco’s first ever climate research conference, Federal Reserve Governor Lael Brainard stated that “we are in discussions
about how we might participate in the Central Banks and Supervisors Network for Greening the Financial System in order to learn from our international colleagues’ approaches to measuring and managing climate risks in the financial system.”[10]

We cannot allow the rest of the world to leave us behind in paving a path forward to address the economic impact of climate change. We ask you to help the United States take a leadership role in addressing the financial repercussions of climate change by
joining the NGFS.

                                                                        Sincerely,

                                                                                                                                                  

 

Mike Levin                                                                                             Sean Casten

Member of Congress                                                                           Member of Congress

 

 


[6] NGFS Report, A Call for Action: Climate change as a Source of Financial Risk

[7] Rainforest Action Network, https://www.ran.org/wp-content/uploads/2020/03/Banking_on_Climate_Change__2020_vF.pdf

[8] Center for American Progress, https://cdn.americanprogress.org/content/uploads/2019/11/20072438/Climate-Change-Financial-Stability-brief.pdf

[9] NGFS Report, A Call for Action: Climate change as a Source of Financial Risk

Related Legislative Issues

Selected legislative information:Energy, Environment, Finance

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