Climate Finance

Overview

In October 2021, the Financial Stability Oversight Council (FSOC) issued a report concluding that climate change poses an “emerging and increasing threat to U.S. financial stability,” and directed FSOC’s member regulatory agencies to institute climate financial regulations. The report comprises a climate risk supervision framework, including standards for corporations to disclose climate risk to investors and regulatory rules requiring banks and other financial institutions to measure their exposure to climate risks. Many aspects of state finances, including budgets and pensions, are exposed to climate risk. State policymakers have a range of tools and policies available that can reinforce the federal climate risk supervision framework and shield constituents from the economic threats of climate change. State governments have tremendous economic power that can be a force for shaping financial market outcomes.