Mar 24, 2021 - Economy

Fed to start assessing climate risks to financial stability

Ben Geman

The Federal Reserve building in Washington, DC. Photo: Daniel Slim/AFP via Getty Images

Federal Reserve board member Lael Brainard said the Fed is creating a "Financial Stability Climate Committee" (FSCC) to, as the name suggests, "identify, assess, and address climate-related risks to financial stability."

Why it matters: The group, announced in a speech Tuesday, is just the latest in a widening series of moves by the central bank to get a better handle on climate-related financial risks.

It comes two months after the Fed announced a separate body called the "Supervision Climate Committee" (SCC).
And late last year, for the first time, the Fed included climate among the risks described in its formal Financial Stability Report.

The intrigue: Brainard said the two committees will work in "close coordination" and her remarks delved into how they differ.

The FSCC's approach will take a macro-level approach to assess risk, exploring the "potential for complex interactions across the financial system."
The SCC, meanwhile, examines climate risks to specific financial institutions to help "develop an appropriate program to ensure the resilience of our supervised firms to those risks."

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Fed to start assessing climate risks to financial stability

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