The OCC, FDIC, and FRB have jointly issued final interagency Principles for Climate-Related Financial Risk Management. These principles are for Large Financial Institutions (over $100 billion assets) and provide “a high-level framework for the safe and sound management of exposures to climate-related financial risks.”
Most agree this is a step in the right direction toward managing climate risk and transitioning the financial sector into a lower carbon economy. However, the Principles are only guidance and many industry actors are calling for more prescriptive rules to drive real decarbonization. In the OCC’s Spring 2023 Semi-annual Risk Perspective report, the agency concluded that “large banks overall have significant additional work to do to move [climate-related financial risk management] programs to maturity.” Large financial institutions should leverage the final Principles to close the gaps identified in the OCC observations of large banks’ management of climate risk to foster more robust and proactive risk management frameworks.
Key takeaways from the Principles:
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