Fed to create committee to respond to climate change risks

US central bank will invest in research and modelling to get a handle on how climate events can threaten the economy.

The Federal Reserve plans to make climate change a major part of its Wall Street oversight by creating a new committee that will identify and respond to dangers a warming planet poses to the financial system. The Financial Stability Climate Committee will be “charged with developing and implementing a program to assess and address climate-related risks to financial stability,” Fed Governor Lael Brainard said in a Tuesday speech. The central bank is investing in research and modeling to get a handle on how climate events can threaten firms and the broader economy, something she conceded might be challenging. The committee will coordinate with the multi-agency Financial Stability Oversight Council, which is responsible for heading off emerging risks that could start another financial crisis. “Climate change can be seen as similar to other financial stability shocks emanating from outside the financial system, such as COVID-19, which are difficult to predict with precision,” Brainard said in remarks delivered online at a conference hosted by Ceres.