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Changing the Climate of Financial Regulation

There is no longer any doubt that climate change will continue to impose deep economic and financial costs on households, communities, businesses, and entire countries. Many of these risks can still be mitigated, but only if regulators in the United States break some bad habits.

DURHAM – As this year’s brutal summer showed, it has become increasingly easy to track the consequences of climate change. Just as extreme weather is claiming more and more human lives, more and more species are being lost to extinction. Entire communities have been displaced by savage storms and intolerable temperatures, and rising sea levels and unstable agricultural production threaten to destroy millions of jobs.

These costs are no longer theoretical or far off. They are here now, and though they are being shouldered across the board, the people who feel them most intensely have less access to information, work outdoors, or live in insufficiently protective conditions. Those who cannot easily relocate or afford sufficient property and casualty insurance are increasingly vulnerable.

Despite these growing costs, US financial regulators have yet to show that they are thinking creatively about potential solutions. Their reluctance stands in stark contrast to financial regulators in other rich countries, where policies and processes are being reimagined to accelerate a rapid, orderly, and just transition to a renewable, biodiverse, and sustainable economy.