Treasury secretary nominee Janet Yellen on Tuesday pledged to create a team to focus on climate change, in a move that’s likely to put the powerful agency at the forefront of the Biden administration’s efforts to combat what she called an "existential threat."
In a hearing before the Senate Finance Committee, Yellen said she planned to start a new Treasury "hub" that would examine financial system risks arising from climate change and on related tax policy incentives. She also intends to appoint a "very senior-level" official to lead climate efforts.
Yellen’s commitments mark a victory for lawmakers and advocates who want the Biden administration to enlist Treasury’s sweeping influence to address the dangers that climate change poses to the economy.
She made clear that she agrees that rising temperatures and devastating natural disasters have the potential to disrupt the banking system, which climate activists say is vulnerable.
"We should take these risks very, very seriously," Yellen said, in response to a question from Sen. Sheldon Whitehouse (D-R.I.).
Yellen’s promise was the latest evidence that climate change will be a fundamental consideration in a wide range of actions undertaken by the new administration. It’s a dramatic shift after the Trump administration spent four years pulling back on climate policy.
She echoed the warnings of a growing number of policymakers around the world who say financial institutions could take big hits to their bottom lines from disasters that damage assets as well as from a transition to a low-carbon economy that devalues investments linked to fossil fuels.
"Climate change is an existential threat," Yellen said. "Both the impact of climate change itself and policies to address it could have major impacts, creating stranded assets, generating large changes in asset prices, credit risks and so forth that could affect the financial system. These are very real risks."
Yellen, who previously regulated banks as chair of the Federal Reserve, will play a major role in financial regulatory policy once the Senate confirms her as Treasury secretary.
At Treasury, Yellen will lead the Financial Stability Oversight Council, a group of top regulators from the Fed, the Securities and Exchange Commission and other agencies that is tasked with averting a repeat of the 2008 Wall Street meltdown. In that position, she will have the ability to set the agenda for federal regulators overseeing banks and markets.
The Fed is among the agencies that has already begun to acknowledge climate change as a potentially destabilizing threat to finance. In the Biden era, the SEC is also expected to play a key role, likely requiring companies to disclose climate risks on their books. Treasury and the agencies will face pressure from climate activists to go even further by discouraging banks from financing fossil fuel producers.
Major banks and insurance companies that could be affected by the new rules have begun to assemble an industry-wide set of principles backing climate action, in an attempt to secure a seat at the table with policymakers.
Read more: politico.com
