NEW YORK–In response to the increasing attention coming from regulators, 19 major U.S. banks have formed a consortium aimed at more comprehensively weighing the risks associated with climate change.
The objective is to develop consistent frameworks and standards for climate risk management, according to the Risk Management Association, with which the 19 banks are partnering.
“When you think about climate change, and then you think about what the science is telling us is going to happen, it will literally have implications and impact across a broad spectrum of industries across a broad spectrum of geographies,” said Mary Obasi, a climate risk executive at Bank of America, who is chairing the consortium, in remarks to the Wall Street Journal. “I think it behooves us—just like we do with any other area of risk—to really understand what could play out, what could happen, and then just build out our processes to manage it well.”
Getting to Net Zero
Nancy Foster, president and CEO of the RMA, told the Journal banks can play a major role in the transition to a so-called “net-zero economy.”
“This is an enormous problem for us all to tackle,” Foster was quoted as saying. “I think it’s so important for banks to lead, as opposed to react.”
Foster told the Journal banks could eventually be involved not only in determining, for example, what assets have exposure to weather events, but also in collecting data on their clients’ carbon emissions. She likened the expected scrutiny from banks to their role in combating money laundering by criminals, the Journal reported.
“Banks argued for a long time, it wasn’t their role to monitor for bad actors on behalf of the government, but that’s the role that they play,” Foster stated. “They’re already in the—I don’t like to call it the policing business—but they’re already doing that today.”
Too Early to Tell
Foster said it is too soon, however, to know exactly how the consortium’s work might affect an individual bank’s policies.
“Many large banks increasingly have sought to position themselves as leaders in efforts to control carbon emissions,” the Journal reported. “Most of the world’s big banks and their regulators last year pledged to fund a shift that would reduce businesses’ carbon footprint. Banks’ push into the climate arena has drawn mixed responses, with some activists questioning the sincerity of banks’ commitments, while more conservative observers argue that banks should provide services to all legal industries, including fossil-fuel extraction.”