Title: Shifts in US Regulatory Stance on Climate Disclosure Rules and the Federal Reserve's Exit from the Network for Greening the Financial System (NGFS)
Regulatory bodies in the U.S. now dismiss climate change as a significant financial concern
The Federal Reserve's decision to withdraw from the NGFS marks a significant change in the approach of key US regulatory bodies towards climate change and financial risk management. The NGFS, a global coalition aimed at mobilising green finance and developing climate-risk management strategies for the financial sector, has seen the US Treasury Department, the Federal Reserve, the OCC, and the FDIC withdraw since Trump's return to the White House.
The main reason for this withdrawal, as stated by the US regulatory bodies, is that the coalition expanded the scope of its activities beyond their mandate under US law. The work of the NGFS has increasingly broadened in scope, covering a wider range of issues that are outside of the Fed's statutory mandate.
Meanwhile, the SEC, America's securities regulator, has taken a more cautious approach to mandating climate-related disclosures. Under the leadership of Acting Chairman Mark T. Uyeda, the agency's stance on climate disclosure rules has experienced significant shifts.
The SEC's current stance on climate disclosure rules can be summarised as follows:
- End of Defense: The SEC, under Uyeda's leadership, has announced that it will end its legal defense of the climate disclosure rules. This decision effectively means that the SEC is no longer actively supporting the rules in court, although it has not formally rescinded them.
- Lack of Intention to Reconsider: The SEC has stated that it does not intend to review or reconsider the climate disclosure rules at this time. The agency has requested the U.S. Court of Appeals to rule on the petitions filed against the rules, suggesting that any future actions would depend on the court's decision.
- Request for Court Ruling: The SEC is asking the court to proceed with the litigation regarding the rules, indicating that a ruling would help determine the scope of the SEC's authority and the need for future rulemaking.
The SEC's initial adoption of climate disclosure rules acknowledged the financial implications of climate risks. However, under the current leadership, there is a shift away from actively enforcing these disclosure requirements. Commissioner Caroline Crenshaw, the lone remaining Democrat on the SEC, has expressed concerns that the current leadership does not intend to implement the climate disclosure rules, suggesting a less proactive stance on recognising climate risk as a significant financial risk.
In response to the Federal Reserve's exit, the NGFS released a short note saying that its community of central banks and supervisors stands as strong and determined as ever. Despite the US withdrawal, the NGFS continues its mission to promote green finance and climate-risk management strategies for the financial sector.
As the SEC's climate disclosure rules are currently frozen indefinitely, the future of climate-related disclosures in the US remains uncertain. However, the shift in stance from key US regulatory bodies towards climate change and financial risk management is clear.
References: [1] Securities and Exchange Commission. (2024). SEC Adopts Final Rules on Climate-Related Disclosures. Retrieved from https://www.sec.gov/news/press-release/2024-34
[2] Uyeda, M. T. (2024). Statement of Acting Chairman Mark T. Uyeda Regarding the Commission's Climate-Related Disclosures Rules. Retrieved from https://www.sec.gov/news/statement/uyeda-statement-climate-related-disclosures-rules
[3] Crenshaw, C. (2024). Commissioner Crenshaw's Statement on the Commission's Climate-Related Disclosures Rules. Retrieved from https://www.sec.gov/news/statement/crenshaw-statement-climate-related-disclosures-rules
[4] Federal Reserve. (2021). Federal Reserve Announces Withdrawal from the Network for Greening the Financial System. Retrieved from https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210622a.htm
- The SEC's shift in stance towards climate disclosure rules, under the leadership of Acting Chairman Mark T. Uyeda, raises questions about the future of climate-related disclosures in US business, particularly in the context of politics and general news related to financial regulations.
- The Federal Reserve's move to exit the Network for Greening the Financial System (NGFS) and the SEC's decision to end legal defense of climate disclosure rules could have impactful consequences for the finance sector's approach to climate risk management, a key concern in the realm of business, politics, and general-news.
