Mar 24, 2021 - Economy & Business

Fed to start assessing climate risks to financial stability

The Federal Reserve building in Washington, DC.

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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