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Major Climate Policy Enactments Increase the Urgency of Managing Climate-Related Risk at Banks

Vol: 9, Issue: 2
2024
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In late 2022, Congress and the state of California enacted a set of sweeping policies expected to hasten the shift to clean energy dramatically in the coming years. These policies will reduce long-term physical risk to banks and the financial system from climate change. At the same time, they may dramatically increase nearer-term risks to banks that are underprepared for the economic transition to clean energy. This Essay sketches the likely implications of these new policies for banks’ transition risk and recommends responses for bank regulators.

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