January 27, 2021
On Jan. 25, the US Federal Reserve and European Central Bank simultaneously signaled their intent to make climate considerations a central part of finance. Both say they will now analyze the risk climate poses to the stability of individual banks, as well as the broader financial system.
The announcements are being welcomed by environmental groups as a way to “ensure that every financial decision takes climate change into account,” Giulia Christianson, who leads sustainable Investing efforts at the World Resources Institute, wrote by email.
The Federal Reserve will create a group of senior staff across the Fed system to “understand the potential implications of climate change for financial institutions, infrastructure, and markets.” The unit is being led by Kevin Stiroh, a respected Treasury official who previously headed up the Fed’s supervision unit as well as research into climate-related risks. Stiroh will now be charged with helping turn the Fed’s escalating concern about the climate into practical guidance and policies that could reshape everything from the assets banks keep on their books to risks companies must disclose.