Federal Reserve Requests Climate Analysis from Largest US Banks

On January 17, the Federal Reserve Board released details on a “Pilot Climate Scenario Analysis” (CSA) to learn how the six largest US banking institutions are managing the risks posed by climate change. The data collected will “enhance the ability of both large banking organizations and supervisors to identify, measure, monitor, and manage climate-related financial risks.” The Federal Reserve designed the CSA exercise to “gather qualitative and quantitative information about the climate risk-management practices” while also engaging with participants to better understand and analyze the data collected. Specific data points the Board is hoping to collect include: detailed documentation of governance and risk-management practices; measurement methodologies; data challenges and limitations; estimates of the potential impact on specific portfolios; and lessons learned from this exercise that could inform any future CSA exercises. In a statement, Fed Vice-Chair of Supervision Michael Barr noted, “the Fed has narrow, but important, responsibilities regarding climate-related financial risks - to ensure that banks understand and manage their material risks, including the financial risks from climate change." The six pilot participants are Bank of America, Citigroup, Goldman Sachs Group, JPMorgan Chase, Morgan Stanley, and Wells Fargo. The Board has requested the information be provided no later than July 31 and plans to publish an analysis of the results at the end of 2023.