Warren Vows to Hold Wall Street Accountable for Climate Crisis

(Bloomberg) -- Democratic presidential candidate Elizabeth Warren said she would hold Wall Street banks, asset managers and insurance companies accountable for their contributions to climate change.

In a plan released Sunday, entitled “Stop Wall Street From Financing the Climate Crisis,” Warren said climate change poses a risk to the economy through extreme weather events such as floods, hurricanes and wildfires.

She also cited research showing that it could cause up to $69 trillion in damages to the financial system by 2100 as investments in the fossil fuel industry “abruptly lose value as we transition to a clean economy, posing risks of financial crisis and destabilization.”

Warren said financial institutions and regulators haven't taken steps to tackle “the existential threat of our time,” and have failed to address Wall Street's role in financing the fossil-fuel industry.

“It's clear that our entire financial system is in major danger from the climate crisis,” Warren said in a Medium post. “And yet, neither the largest U.S. financial institutions, nor the public watchdogs that are supposed to hold them accountable, have taken adequate steps to address Wall Street's role in exacerbating the crisis.”

‘Markets With Rules'

Warren, who calls herself a capitalist and a believer in “markets with rules,” has released several plans aimed at tightening Wall Street regulations. The latest proposal would empower federal regulators to use existing tools to hold Wall Street accountable.

Warren called on the Federal Reserve to use its authority under the Dodd-Frank Act to impose higher capital standards, margin requirements and tougher stress tests on financial institutions depending on their exposure to climate-related risks. She also said that the Financial Stability Oversight Council, created under Dodd-Frank to monitor risks across markets, should be investigating the climate threats posed by financial institutions.

Under her plan, Warren said the Securities and Exchange Commission would require publicly traded companies to disclose their exposure to climate risk, including the likely effect if climate change continues at its current pace and the likely effect if the world restricts greenhouse gas emissions to meet the targets of the Paris climate agreement.

Reporting Extraction

She would also impose stricter rules requiring financial institutions to appoint people with climate change expertise to their boards. That expertise would need to be disclosed to shareholders during board elections, though the details about how that would be monitored were not immediately clear.

In addition, Warren would “require U.S. banks to report annually how much fossil fuel equity and debt is created, and/or held as assets, with respect to all fossil fuel extraction and infrastructure.”

Warren would also ask the SEC Office of Credit Ratings to direct credit rating agencies to create new rating methods that reflect the exposure of securities and other financial assets to climate change, as well as to the companies that issue them.

“We will not defeat the climate crisis if we have to wait for the financial industry to self-regulate or come forward with piecemeal voluntary commitments,” Warren said. “Wall Street banks are making a quick buck accelerating climate change, all while communities across the country are suffering.”

Passing on Costs

Warren accused insurance companies of passing the cost of climate change on to consumers and said that, if elected, she would require insurers to disclose the size of the premiums from coal, oil and gas projects and push the SEC to ensure these companies have properly assessed climate-related risks.

Warren also vowed to protect pensioners who might be exposed to the risk of fossil fuels by pushing funds managers to divest from fossil fuels and prioritize other environmental, social or governance options. She would ask the SEC and Department of Labor to declare carbon-related investments inconsistent with a fund manager's duty to their clients. Simultaneously, she would also tighten bankruptcy laws for coal and fossil-fuel companies.

Warren's proposal cites reports that some of the largest banks and asset managers have increased their holdings of fossil fuel assets even after the adoption of the Paris agreement, and financed more than $700 billion for fossil fuel companies.

She also points out that some big financial firms have warned against the risks of climate change. In December, Goldman Sachs committed about $750 billion over the next decade for “climate transition and inclusive growth finance.” Last month, Larry Fink, Blackrock's chief executive officer, warned business leaders on the climate crisis, and said his firm would take steps to address the issue across the thousands of companies in which it invests. And last week, JPMorgan Chase & Co. tightened its policy on fossil-fuel financing.

Warren called these actions “a small step in the right direction,” but said they were “long overdue” and weren't enough to protect people from a climate-fueled financial crisis.

To contact the reporter on this story: Misyrlena Egkolfopoulou in Charleston at megkolfopoul@bloomberg.net

To contact the editors responsible for this story: Wendy Benjaminson at wbenjaminson@bloomberg.net, Max Berley, Ros Krasny

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