In September, the Market Risk Advisory Committee of the U.S. Commodity Futures Trading Commission (CFTC) issued a significant, yet perhaps under-publicized, report titled “Managing Climate Risk in the U.S. Financial System.” The report identified several key findings, including that: climate change “poses a major risk to the stability of the U.S. financial system and to its ability to sustain the American economy;” “financial markets will only be able to channel resources efficiently to activities that reduce greenhouse gas emissions if an economywide price on carbon is in place at a level that reflects the true social cost of those emissions; and “disclosure of information on material, climate-relevant financial risks … has not resulted in disclosures of a scope, breadth, and quality to be sufficiently useful to market participants and regulators.” CFTC, Managing Climate Risk in the U.S. Financial System at i-iv (Sept. 2020). The report recommends that the U.S. establish a price on carbon that is consistent with the Paris Agreement’s goal of limiting global temperature rise this century to less than two degrees Celsius above pre-industrial levels.

The report is particularly notable for its blunt assessment of the risks posed by climate change to the underpinnings of the U.S. economy, and its conclusion that comprehensive federal climate change legislation is required to mitigate these risks. (For those wondering at the unlikelihood of a report such as this being published by a federal agency in a presidential administration that has demonstrated a marked tendency toward deregulation, the report was not voted on by the commissioners of the CFTC and has been characterized as representing the perspective of private sector committee members.) Other federal agencies have been reluctant to take additional steps to address climate change investment risks. The Securities and Exchange Commission, for example, resisted calls to incorporate prescriptive climate change disclosure requirements when adopting final rules modernizing Regulations S-K, choosing instead to retain the principles-based materiality standard currently governing climate change disclosures. See Commissioner Allison Herren Lee, SEC, Regulation and ESG Disclosures: An Unsustainable Silence (Aug. 26, 2020)