- Treasury Secretary Janet Yellen warned on Tuesday that climate change could lead to losses in asset values across the country’s financial system in years to come.
- Yellen made the remarks during the first meeting with the Climate Financial Risk Advisory Board.
- “A delayed and disorderly transition to a net zero economy can also lead to shocks to the financial system,” Yellen said.
U.S. Treasury Secretary Janet Yellen delivers remarks on “Next Steps in the Evolution of Development Finance” at the Center for Strategic and International Studies (CSIS) in Washington, U.S., February 9, 2023.\
Leah Millis | Reuters
Treasury Secretary Janet Yellen warned on Tuesday that climate change is already taking a heavy economic toll on the United States and could cause major losses for the financial system in years to come.
Yellen made the remarks during the first meeting with the Climate-related Financial Risk Advisory Committee (CFRAC), an advisory board that was set up last year by the Financial Stability Oversight Council to strengthen action to minimize the climate risk for the economy. .
“As climate change intensifies, natural disasters and warming temperatures can lead to lower asset values that could ripple through the financial system,” she told the meeting. “A delayed and disorderly transition to a net zero economy can also lead to shocks to the financial system.”
According to a federal government report released last year, climate-related disasters have caused economic losses through damage to infrastructure, disruption of essential services and loss of property values. The United States has experienced an average of nearly eight billion-dollar disasters each year for the past four decades. Over the past five years, that number has grown to nearly 18 events per year.
“These impacts are not hypothetical,” Yellen said. “They are already playing.”
Yellen said states like California, Florida and Louisiana have recently experienced particularly severe storms and wildfires, and noted how tornadoes in the south and intensifying storms on the west coast indicate that the climate change is accelerating.
She said some insurers were raising their rates or even pulling out of high-risk areas in response to rising losses.
“This has potentially devastating consequences for homeowners and the value of their properties,” Yellen said. “Developments like these can ripple through other parts of our interconnected financial system.”
The Biden administration has taken executive action to address climate risk to the economy, including an impending Securities and Exchange Commission action that will require publicly traded companies to disclose their greenhouse gas emissions. The agency is now considering scaling back its proposed climate disclosure rule.
Yellen has previously promoted historic climate investments in President Biden’s Cut Inflation Act, specifically touting the legislation’s tax credits and other private sector incentives aimed at lowering energy costs for consumers and national greenhouse gas emissions.
SHOW: Potential relaxation of climate disclosure rules