Sen. Elizabeth Warren, who is polling among the top contenders in the Democratic field for the 2020 presidential race, is calling on big banks to disclose their plans to identify and offset climate-change risks.
“To protect themselves and the economy from climate-driven catastrophes, large financial institutions must act quickly to address risks,” Warren, a frequent critic of big banks, said in letters sent Wednesday to top executives.
She sent her queries, with responses due Feb. 7, to Bank of America /zigman2/quotes/200894270/composite BAC +5.92% , Bank of New York Mellon /zigman2/quotes/200171276/composite BK +2.44% , Citigroup /zigman2/quotes/207741460/composite C +7.30% , Goldman Sachs /zigman2/quotes/209237603/composite GS +6.59% , JP Morgan /zigman2/quotes/205971034/composite JPM +4.04% , Morgan Stanley /zigman2/quotes/209104354/composite MS +6.58% State Street /zigman2/quotes/209758976/composite STT +4.33% and Wells Fargo /zigman2/quotes/203790192/composite WFC +5.25% .
Warren’s ebb and flow in the polls has had some impact on Wall Street where the prospect of tougher regulations on financial firms should she prevail in the race for the White House has nicked sentiment at times, although not enough to keep the major averages /zigman2/quotes/210598065/realtime DJIA +3.44% /zigman2/quotes/210599714/realtime SPX +3.41% from records.
Late last year, the Federal Reserve Bank of San Francisco published a series of research papers and held the system’s first-ever climate research conference, both of which highlighted the climate-related dangers that businesses, communities and the financial system face, including the possibility of a significant decrease in home values, the end of lending by financial institutions to communities susceptible to flooding, and a loss of tax revenue for towns coming just as they need these funds to build sea walls and make other investments in resilient infrastructure, she said in a release.
Some banks are cutting their own climate-change exposure by selling riskier disaster-area mortgages to taxpayer-supported entities. That puts the health of the mortgage market at risk, a potential repeat of the financial conditions at the root of the banking crisis a decade ago, a research paper published in September argues.
Citing the San Francisco Fed’s research and recent statements from Federal Reserve Board Governor Lael Brainard regarding the severity of climate risks to the U.S. economy and financial system, Warren expressed concern that regulators are ignoring these risks and urged the banks to move swiftly to address them. Warren last year was a co-signer of a bill that would direct the Fed to “stress test” banks’ resilience to climate-related financial risks.
“While some central banks around the world are taking action to confront climate-related risks to the global financial system, U.S. regulators continue to ignore the risks, despite the San Francisco Fed’s groundbreaking work,” Warren said. “To protect themselves and the economy from climate-driven catastrophes, large financial institutions must act quickly to address risks.”
Goldman Sachs, with a mid-December announcement, became the first of the large U.S. banks to establish explicit restrictions on financing for any part of the oil-and-gas sector. The policy change stressed protecting the Arctic National Wildlife Refuge in particular. It is also the first major U.S. bank to rule out direct finance for thermal coal mines and plants world-wide and increase funding for sustainable projects.
Warren, who trails candidates Joe Biden, the former vice president, and Sen. Bernie Sanders in recent national opinion polls , has advanced a climate platform that would spend $2 trillion over 10 years in green research, manufacturing and exporting; $1.5 trillion in federal energy product procurement over 10 years; and $100 billion in aid for clean-energy deployment. She’ll ban new fossil-fuel leases offshore and on public lands and will regulate companies to disclose climate risks.
Warren is framing climate change as part of her economic, public resources and national security platforms instead of as a stand-alone environmental issue, a strategy that some analysts say means she’s already considering how she’ll challenge Donald Trump in a general election.
Fund giant BlackRock made headlines recently with its planned shift in climate considerations in its investments, saying it believed the financial system is at risk of ignoring the signs. The World Economic Forum in a curtain-raising report ahead of its annual power event underway now in Davos, Switzerland, made climate-change risk a longer-term priority.
But at least one high-profile participant wasn’t buying it. Trump told Davos delegates they should “reject the perennial prophets of doom and their predictions of apocalypse,” a swipe at environmental policy makers and activists.