(Opens in a new window) Reports Climate and Economic Transformation

Unsafe At Any Charge: Why Financial Regulators Should Actively Mitigate Climate-Related Risk

May 26, 2021

By David Arkush

(Opens in a new window) Download Report

Avoiding climate disaster demands an economic transformation unprecedented in speed and scope toward a near-zero emissions economy—a transition that inherently threatens to disrupt financial stability in the absence of timely and effective oversight by financial regulators. Thus far, financial regulators have not taken seriously their role in protecting the financial system from the imminent threat of climate change by guiding the disinvestment in fossil fuel assets that will soon be defunct. Their inaction has been the result of a mischaracterization of climate threats as “risks” to be minimized, rather than as unavoidable harms.

In Unsafe at Any Charge: Why Financial Regulators Should Actively Mitigate Climate-Related Risk, David Arkush argues that without assertive regulatory intervention, financial institutions and the financial system face near certain harms from climate change—rather than just “risks”—the scale and urgency of which are understated in the financial regulatory literature. 

In this report, Arkush discusses the shortcomings of common regulatory responses—in particular, their inability to adequately prevent uncertain threats or achieve the core task of managing an orderly phaseout of certain assets and activities. He proposes recentering and taking seriously the mission of safety and soundness in climate-related financial regulation, which means deploying a set of authorities capable of meeting the gravity and urgency of the climate crisis. Finally, he argues that this mission requires regulators to start orchestrating an orderly clean-energy transition that will close the wide gap between the financing of fossil fuels and science-based climate targets.

Tags: ,