Treasury Secretary Janet Yellen today flagged climate change as the most significant emerging risk for the Financial Stability Oversight Council to address, noting that “our financial system must be prepared for the market and credit risks of these climate-related events.”
Yellen—who serves as chair of FSOC—added that “it must also be prepared for the best-possible case scenario: that we begin a rapid transition to a net-zero carbon economy, which also creates potential challenges for financial institutions and markets,” and noted that FSOC will play an important role in coordinating regulatory efforts related to measuring and managing climate risk.
In addition to climate change, Yellen also said FSOC will focus on vulnerabilities in nonbank financial intermediation and the resiliency of the Treasury market after last year’s significant market disruption.
