Climate Risk and Banking

ABA Position

America's banks recognize the growing concerns from policymakers, investors, customers and others around climate change, including the impact to banks and the communities they serve from efforts to address climate-related financial risks. While there is debate over the role banks can and should play in responding to climate-related financial risk, ABA believes common-sense, market-based solutions offer the best opportunity for addressing this world-wide issue. In addition, every effort should be made to prevent or minimize economic dislocation from policy and market changes, and to recognize the unique challenges facing financial institutions in energy-intensive communities.

There is much more that needs to be learned about climate change, including how it affects our economy, which is why we support careful and deliberate study to inform the policy debate.

Key areas where policy makers are focusing their attention and where ABA will engage to ensure that banks’ interests are well represented include:

Risk Management & Disclosure Requirements

ABA believes that prudential regulations should continue to focus on actual risks banks face, and that regulators should develop standardized definitions and principle-based disclosure guidance focused on material risks. Bank regulators should focus on development of scenario analysis methodologies to accurately gauge both physical and transitional risks that will impact banks; and the development of needed disclosures to gain the information necessary to measure those risks. ABA will work to ensure that those disclosures do not overreach or inappropriately task banks with the collection of information beyond what is necessary to inform business and risk decisions.

Business Discretion

ABA believes that banks should be able to continue to make their own decisions about who they will do business with, and who they won’t, as long as that engagement is consistent with the law. If policy makers want to regulate fossil fuels or other industries further, they should do so directly through appropriate legislative and regulatory action, not indirectly through banks or other financial intermediaries.