Today is Valentine’s Day. It’s a time to think about and appreciate all those in your life that you love. Those that know me know that my wife and family are the core of my life. Thus, today’s message is about the future…their future. I have been, and still am, terrified about the planet that my kids and their kids will be inheriting from me, from all of us, what we’ve done to it and the impact it will have on their lives.
There is no uncertainty that they will face climate circumstances that will be dramatically different in ways that I have pointed out. Now, though, I have a spark of optimism that finally, FINALLY, those in leadership positions, people that can actually make a difference, are beginning to seriously pay the degree of attention and concern that destroying our climate, and consequences thereof, deserves.
I’ve consistently said that the United States has a unique roll in combatting a rapidly changing climate the result of which is the unraveling of the web of life upon which all we rely. While what we accomplish here in the U.S. is only a small fraction of what needs to be done worldwide, our special role is to prove that it is possible to make the changes in our society needed to minimize and mitigate the worst consequences we might otherwise experience. Most importantly, not only is it technically possible, not only will it not destroy our economic prosperity but will actually enhance it. Not only will we enhance our economic prosperity but also make life much more enjoyable with clean air, water, lands, public health and equity.
As the following article points out, our government is beginning to initiate the steps necessary to not only pay appropriate attention to the crisis but to actually put into place what is required to push and pull us into a more sustainable future.
As I’ve always said, follow the money. Once we recognize the financial risk we face from a drastically altered climate and do what is necessary to address this, everything else will follow.
Now we are finally at the precipice of this epiphany… From the following article:
“Climate change is an emerging risk to financial institutions, the financial system, and the economy,”
Some of the following comments relate to exactly what I wrote about last week regarding the insanity of huge current investments in assets (real estate) that is clearly at very high risk from climate related disasters.
“Among the climate risks that Ms. Yellen and others see for the financial system are more frequent severe weather events such as flooding or wildfires that endanger assets underpinning bank loans.
For example, mortgages in coastal areas are vulnerable to hurricanes and sea level rise. New mortgages issued for U.S. coastal homes have exceeded $60 billion annually in recent years, according to research from economists Amine Ouazad and Matthew E. Kahn.
Seriously? You bet. And none toooooo soooooon.
From yesterday’s Wall Street Journal:
Wall Street Journal
Yellen Is Creating a New Senior Treasury Post for Climate Czar
Obama administration veteran Sarah Bloom Raskin is top candidate to lead department’s climate efforts
Sarah Bloom Raskin has served as a deputy Treasury secretary and member of the Fed board.
WASHINGTON—Treasury Secretary Janet Yellen plans to wield the department’s broad powers to tackle potential risks to the financial system posed by climate change while pushing tax incentives to reduce carbon emissions.
Ms. Yellen is looking to a veteran of the Obama administration, Sarah Bloom Raskin, as the leading candidate for a new senior position that would head a new Treasury climate “hub,” according to people familiar with the matter. A former deputy Treasury secretary who once worked alongside Ms. Yellen on the Federal Reserve Board, Ms. Raskin has warned in interviews and speeches that U.S. regulators must do more to strengthen the financial system’s resilience to climate risks.
The move is part of the Biden administration’s effort across many government departments to address climate change and its impact on various industries. In two early moves, the administration rejoined the Paris climate accord and suspended new oil and gas leases on federal land.
“I think we need to seriously look at assessing the risk to the financial system from climate change,” Ms. Yellen said at her Senate confirmation hearing last month, calling it an “existential threat” to the U.S. economy. Ms. Yellen said the new hub would review financial stability risks and tax policy incentives related to climate change.
Her climate push is already facing resistance from some Republicans in Congress and financial industry officials wary of new regulatory burdens on banks after the Obama administration imposed widespread new rules following the 2008 financial crisis.
While climate risks are broadly acknowledged in the industry, there is no consensus on whether they can be mitigated through regulation.
Bank representatives say they worry U.S. policy makers could adopt some form of nonbinding climate stress tests—which have been introduced in the U.K.—potentially to help set bank capital requirements. They contend economic modeling is “extremely subjective and highly variable,” according to Francisco Covas of the Bank Policy Institute, an industry lobbying group.
“Significant further research and testing should precede any effort to make decisions about capital adequacy or other issues based on the results of climate-related stress tests,” Mr. Covas, a former Fed economist, wrote in an October research note.
Sen. Pat Toomey (R., Pa.) said he was concerned regulators could use climate stress tests to keep banks from lending to the oil-and-gas industry. “Financial regulators lack the expertise to make environmental policy,” he said in questions submitted to Ms. Yellen after her confirmation hearing.
‘Both the impact of climate change itself and policies to address it could have major impacts, creating stranded assets, generating large changes in asset prices, credit risks and so forth that could affect the financial system. These are very real risks.’— Treasury Secretary Janet Yellen
Among the climate risks that Ms. Yellen and others see for the financial system are more frequent severe weather events such as flooding or wildfires that endanger assets underpinning bank loans.
For example, mortgages in coastal areas are vulnerable to hurricanes and sea level rise. New mortgages issued for U.S. coastal homes have exceeded $60 billion annually in recent years, according to research from economists Amine Ouazad and Matthew E. Kahn.
Banks’ business may also be altered as countries reduce their reliance on fossil fuels, including more widespread use of electric vehicles and shifts to renewable energy resources. Such shifts could reduce the value of assets owned by oil and power companies and increase the riskiness of loans to those firms.
“Both the impact of climate change itself and policies to address it could have major impacts, creating stranded assets, generating large changes in asset prices, credit risks and so forth that could affect the financial system,” Ms. Yellen said at her hearing. “These are very real risks.”
While the Treasury doesn’t directly supervise or regulate banks or markets, it helps steer the regulatory agenda and monitors risks to the financial system. Ms. Yellen heads the Financial Stability Oversight Council, a panel of regulators that also includes the Fed, the Securities and Exchange Commission and the Commodity Futures Trading Commission.
The new push comes as some major financial firms have taken steps in recent years to reduce their exposure to what they considered the worst climate offenders. JPMorgan Chase & Co. and other international banks have also committed to aim their financing in ways that help the world meet the goals of the Paris accord.
“We need to determine, how do we move to a decarbonized economy, low-carbon emitting [and] what role do financial institutions and intermediaries play,” said Tim Adams, a former George W. Bush Treasury official and the president and chief executive of the Institute of International Finance, an industry trade group.
Ms. Yellen is likely to find an ally in Jerome Powell, who succeeded her as chairman of the Fed. The central bank oversees the nation’s biggest banks alongside other regulators, including the Office of the Comptroller of the Currency, which is a bureau of the Treasury.
“Climate change is an emerging risk to financial institutions, the financial system, and the economy,” Mr. Powell said at a December press conference.
The Fed said in December it had joined an international effort of central banks and financial regulators aimed at mitigating climate risks. It is also bringing on the top bank oversight official from the New York Fed to lead a newly created Supervision Climate Committee in Washington starting next month.
The Treasury’s greater consideration of climate change will also factor into tax policy and international financial diplomacy. Congress is likely to consider climate legislation this year that could include tax incentives, something the Treasury will help shape and implement. And the department will play a key role coordinating on climate issues with global counterparts through the Group of Seven and G-20 groups of leading economies.
Ms. Yellen will join her first meeting as Treasury secretary with the G-7 finance ministers and central bankers on Friday, where climate change is expected to be on the agenda.
Ms. Raskin and her husband, Rep. Jamie Raskin, at home in Takoma Park, Md., in May.PHOTO: DREW ANGERER/GETTY IMAGES
Ms. Raskin, when she served at the Treasury under President Obama, led an effort to grapple with the financial stability risks of cybersecurity. She is currently a law professor at Duke University and is married to Rep. Jamie Raskin (D., Md.), the top prosecutor in the second impeachment trial of President Donald Trump.
Ms. Raskin was a key contributor last year to a report from the Ceres Accelerator for Sustainable Markets, a climate advocacy group, that detailed dozens of potential steps for regulators.
In addition to requiring more disclosures and stress-testing, the report said U.S. regulators should work with their global counterparts to identify activities that could exacerbate climate risks, consider encouraging banks to support sustainable investments in low-income communities, and require bank supervisors to monitor the effects of climate risk on bank lending and investment.
“There is opportunity in pre-emptive, early and bold actions by federal economic policy makers looking to avoid catastrophe,” Ms. Raskin wrote in the report’s foreword. “The tools exist. They are available now, and ready to be picked up and deployed.”
—David Benoit contributed to this article.
Write to Kate Davidson at kate.davidson@wsj.com
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Appeared in the February 13, 2021, print edition as ‘Yellen Puts New Focus on Climate Risk.’
