The discussion over climate change has up until now largely centered on the threats to people’s health, their homes, food supplies and on our air and natural resources. However, the scope of these concerns are expanding. The Federal Reserve recently for the first time formally highlighted climate change as a potential threat to the stability of the financial system.
In a November 9 statement, Federal Reserve Board Governor Lael Brainard said she “welcomes the introduction of climate into the Financial Stability Report.” The FSR is the Federal Reserve Board’s current assessment of the resilience of the U.S. financial system.
Although the Fed’s report does not yet provide direction on specific steps that markets and financial institutions should take, the fact the Board of Governors believes climate change-induced impacts may pose risks to real estate loans, mortgage-backed securities and therefore to the holders of these loans and securities should heighten our country’s efforts to address climate change.
Read Governor Brainard’s statement and the Fed’s report. The section on climate change can be found on pages 58-59.