Climate Risk Scorecard
Notable Progress
Some Progress
No Progress
Not Applicable
Office of the Comptroller of the Currency
Notable Progress
Reasoning
For more information about our key findings and learnings, please download the 2024 Climate Risk Scorecard report.
Notable Progress
Reasoning
For more information about our key findings and learnings, please download the 2024 Climate Risk Scorecard report.
Methodology
We assessed the extent to which the agency has expanded and established sustainable, well-resourced capacity “to define, identify, measure, monitor, assess, and report on climate-related financial risks and their effects on financial stability.” (FSOC 1.3).Â
This includes investments in staffing, appointing senior staff, forming internal working groups and/or committees, staff training, investments in technological and analytical capabilities, and financial resources provided to staff working on these issues.Â
Some Progress
Reasoning
For more information about our key findings and learnings, please download the 2024 Climate Risk Scorecard report.
Methodology
We assessed the extent to which the agencies have made information and data available to the public.Â
“[I]nclude descriptions of their activities related to climate-related financial risks in their annual reports and consider incorporating climate-related financial risks in relevant risk reports that they publish, as appropriate ... [and] within the context of each member’s mandate and authority.” (FSOC 1.4).Â
“[M]ake climate-related data for which they are the custodians freely available to the public, as appropriate and subject to any applicable data confidentiality requirements.” (FSOC 1.5).Â
Notable Progress
Reasoning
For more information about our key findings and learnings, please download the 2024 Climate Risk Scorecard report.
Methodology
We assessed the extent to which the agency - consistent with its mandate and authorities and its membership in the Financial Literacy and Education Commission (FLEC) - has assessed and made progress on addressing climate risks to financially vulnerable communities. Â
“[C]oordinate the analyses of climate-related financial risks ... with their efforts to understand impacts on communities and households. FSOC members should, as applicable, integrate these analyses into the[ir annual] public reports.” (FSOC 1.6).Â
“[E]valuate climate-related impacts and the impacts of proposed policy solutions on financially vulnerable populations when assessing the impact of climate change on the economy and the financial system.” (FSOC 1.8). Â
“[FLEC members should] analyze and understand the impact of climate change on the financial well-being of financially vulnerable populations. FSOC members that are also FLEC members should actively participate in this analysis.” FLEC members include the Fed, OCC, FDIC, NCUA, SEC, CFTC, and FHFA. (FSOC 1.9). Â
Some Progress
Reasoning
For more information about our key findings and learnings, please download the 2024 Climate Risk Scorecard report.
Methodology
We assessed the extent to which the agencies have advanced research and data collection on climate risk. Â
“Identify[] the data needed to evaluate the climate-related financial risk exposures of regulated entities and financial markets.” (FSOC 2.1).  Â
“Perform[] an internal inventory of currently collected and procured data and its relevance for climate risk assessments." (FSOC 2.1).  Â
“Develop[] a plan for procuring necessary data through data collection, data sharing arrangements and information purchased from data providers or other sources.” (FSOC 2.1).  Â
“[F]acilitate the sharing of climate-related data across FSOC members and non-FSOC member agencies to assess climate-related financial risk, consistent with data confidentiality requirements.” (FSOC 2.2)   Â
“[D]evelop consistent data standards, definitions, and relevant metrics ... to facilitate common definitions of climate-related data terms, sharing of data, and analysis and aggregation of data.” (FSOC 2.5)Â
No Progress
Reasoning
For more information about our key findings and learnings, please download the 2024 Climate Risk Scorecard report.
Methodology
We assessed the extent to which the agencies have begun to assess, develop, and conduct climate scenario analyses at their supervised entities. Â
“[C]ollaborate with external experts to identify climate forecasts, scenarios, and other tools necessary to better understand the exposure of regulated entities to climate-related risks and how those risks translate into economic and financial impacts.” (FSOC 4.1).Â
“[U]se scenario analysis, where appropriate, as a tool for assessing climate-related financial risks, taking into account their supervisory and regulatory mandates and the size, complexity, and activities of regulated entities.” (FSOC 4.3).Â
“[C]onsider using common scenarios that build on existing work, including scenarios developed by NGFS and work at the FSB, as appropriate for the institutions and markets under consideration.” (FSOC 4.4).Â
No Progress
Reasoning
For more information about our key findings and learnings, please download the 2024 Climate Risk Scorecard report.
Methodology
We assessed the extent to which the agency has enhanced public reporting requirements for their regulated entities. The market is currently mispricing climate risk. The lack of consistent disclosure by entities supervised by U.S. financial regulators is an obstacle to market efficiency and to the accurate pricing of climate risk. Â
“[R]eview their existing public disclosure requirements and consider, as appropriate, updating them to promote the consistency, comparability, and decision-usefulness of information on climate-related risks and opportunities.” (FSOC 3.1).Â
“[C]onsider enhancing public reporting requirements for climate related risks in a manner that builds on the four core elements of the TCFD.” (FSOC 3.2).Â
“[C]onsider whether such disclosures should include disclosure of GHG emissions.” (FSOC 3.4).Â
“[R]eview banks’ public regulatory reporting requirements to assess whether enhancements are needed to provide market participants with information on institutions’ climate-related financial risks, taking into account a bank’s size, complexity, and activities.” (FSOC 3.7).Â
Notable Progress
Reasoning
For more information about our key findings and learnings, please download the 2024 Climate Risk Scorecard report.
Methodology
We assessed the extent to which the agencies have enhanced supervisory scrutiny of climate risk management at their supervised entities to ensure their resilience and the resilience of our financial system.                Â
“[C]larif[y] or enhanced risk management expectations ... [and] guidance.” (FSOC 4.8).Â
“[R]eview[] regulated entities’ efforts to address climate-related risks." (FSOC 4.6).
“[R]eview[] existing ... guidance ... to identify where clarifications and enhancements are needed.” (FSOC 4.7).Â
Some Progress
Reasoning
For more information about our key findings and learnings, please download the 2024 Climate Risk Scorecard report.
Methodology
We assessed the extent to which the agencies have incorporated climate risk management expectations into their regulatory requirements for supervised entities to ensure their resilience and the resilience of our financial system.
“[C]larif[y] or enhanced risk management ... requirements.” (FSOC 4.8).Â
“[R]eview[] existing regulations ... and regulatory reporting to identify where clarifications and enhancements are needed.” (FSOC 4.7).Â
Notable Progress
Reasoning
The OCC has consistently affirmed climate as a risk to the financial system since the previous scorecard. Acting Comptroller Michael Hsu and Chief Climate Risk Officer Nina Chen have continued to deliver public remarks since the 2022 Scorecard acknowledging the systemic nature of climate-related financial risk:
Acting Comptroller Hsu speech discussing climate risk management and the Community Reinvestment Act as priorities (September 2022)
Acting Comptroller Hsu testimony in front of the Senate Committee on Banking, Housing, and Urban Affairs noting climate risk as one of OCC’s four regulatory priorities (November 2022)
Chief Climate Risk Officer Chen remarks at Ceres webinar on federal financial regulator progress on climate-related financial risk (December 2022)
Acting Comptroller Hsu remarks at FSOC meeting supporting the Fed’s issuance of draft Climate Principles and collaboration with the Fed and FDIC in approaching climate-related financial risks (December 2022)
Additionally, the OCC has included the risks presented by climate change to the financial system in its Spring 2021 Semiannual Risk Perspective, fiscal year 2022 Bank Supervision Operating Plan, Fall 2021 Semiannual Risk Perspective, 2021 Annual Report, Spring 2022 Semiannual Risk Perspective, FY23-27 Strategic Plan, FY23 Bank Supervision Operating Plan, Fall 2022 Semiannual Risk Perspective, and 2022 Annual Report. In 2021, the OCC joined the Network of Central Banks and Supervisors for Greening the Financial System, provided a detailed update to FSOC on its activities related to climate risk for the FSOC Report on Climate-Related Financial Risk, and published draft Principles for Climate-Related Financial Risk Management for Large Banks.
Next Steps
Continue to publicly acknowledge the systemic nature of climate-related financial risk in agency speeches and publications. Â
*These recommendations, all within the OCC’s mandate and authority, are designed to address climate-related financial risks and protect our financial institutions, financial system and communities.Â
Methodology
We assessed the extent to which the agency has publicly affirmed the systemic nature of the climate crisis individually in official agency communications (outside of the FSOC report).Â
Notable Progress
Reasoning
In September 2022, the OCC announced the establishment of the Office of Climate Risk and appointment of Nina Chen as its chief climate risk officer. The Office has at least one other full-time staff analyst and reports directly to the acting comptroller. It is tasked with overseeing the OCC’s activities pertaining to climate-related financial risks and supervision, including developing communication guidance and training for examiners and other OCC staff, co-leading the development of policies on climate-related financial risk supervision, developing examination strategy guidance and review of strategies for largest financial institutions with over $100 billion in assets, and promoting interagency collaboration and knowledge sharing.
Next Steps
Continue work within the CFRAC, FLEC, Basel, NGFS, and other interagency climate risk working groups.Â
Continue internal staff education and training on climate-related financial risks. Â
Train bank examiners on climate-related financial risk and how these risks fit within existing risk frameworks. Â
Train CRA examiners on the new community development definition for climate resiliency activities.Â
Support expansion of financial institution internal climate risk management capacity.Â
Establish and announce an internal plan for how the OCC will address climate-related financial risk to its regulated financial institutions, including goals and priorities. Â
*These recommendations, all within the OCC’s mandate and authority, are designed to address climate-related financial risks and protect our financial institutions, financial system and communities.Â
Methodology
We assessed the extent to which the agency has expanded and established sustainable, well-resourced capacity “to define, identify, measure, monitor, assess, and report on climate-related financial risks and their effects on financial stability.” (FSOC 1.3).Â
This includes investments in staffing, appointing senior staff, forming internal working groups and/or committees, staff training, investments in technological and analytical capabilities, and financial resources provided to staff working on these issues.Â
Some Progress
Reasoning
The OCC has addressed climate-related financial risks as an area of concern in multiple agency publications. In its FY23 2023 Bank Supervision Operating Plan, the OCC stated that it would continue information gathering efforts and conduct additional industry outreach. The Plan also stated that examiners will monitor the development of climate-related financial risk frameworks at the largest banks and engage with bank management to understand the challenges banks face, including limits on data, governance, and procedures, as well as strategic planning, scenario analysis capabilities and techniques, and incorporation into current risk management processes.
In its Fall 2022 Semiannual Risk Perspective, the OCC noted that it is actively engaged with the Financial Stability Oversight Council’s (FSOC) newly established Climate-related Financial Risk Committee (CFRC). The Perspective also noted that OCC examiners are continuing to develop an understanding of banks’ efforts in integrating climate-related financial risks into their risk management frameworks.
In its 2022 Annual Report, the OCC flagged that it is still considering comments it received in response to its draft 2021 Climate Principles and is working with the Fed and FDIC to determine the next steps in this area. The Report also flagged the agency’s interactions with community banks regarding their experiences handling acute weather events.
However, the OCC does not provide updates on its climate risk research or management activities on its designated webpage, and does not provide regular updates on its work outside of its scheduled, cumulative reports and assessments.
Next Steps
Update the Office of Climate Risk’s designated webpage to provide updates on completed and ongoing climate risk-related activities, including what the office is working on, announce other staff assigned to the office, disclose what the office’s budget and resources are, and other recommendations in this section. Â
*These recommendations, all within the OCC’s mandate and authority, are designed to address climate-related financial risks and protect our financial institutions, financial system and communities.Â
Methodology
We assessed the extent to which the agencies have made information and data available to the public.Â
“[I]nclude descriptions of their activities related to climate-related financial risks in their annual reports and consider incorporating climate-related financial risks in relevant risk reports that they publish, as appropriate ... [and] within the context of each member’s mandate and authority.” (FSOC 1.4).Â
“[M]ake climate-related data for which they are the custodians freely available to the public, as appropriate and subject to any applicable data confidentiality requirements.” (FSOC 1.5).Â
Some Progress
Reasoning
The OCC’s 2021 draft Climate Principles inquired whether it should modify existing regulations and guidance to address the impact of climate-related financial risks on those communities.
In May 2022, the OCC, FDIC, and Fed jointly released a notice of proposed rulemaking (NPR) to amend their regulations implementing the CRA, which proposes the inclusion of climate resiliency activities to assist communities prepare for and adapt to climate risks. This is an important step towards climate justice for low-to-moderate income communities, as these communities are more likely to be in vulnerable areas impacted by natural disasters, which are increasing in frequency and intensity, and are disproportionately impacted by the associated financial risks and losses. However, the agencies have not yet published the final rule or indicated when the final rule will be released. Similarly, the OCC has not indicated whether it is actively engaged with FLEC and other FLEC members to understand the impacts of climate-related financial risks on vulnerable communities.
Next Steps
Actively and transparently engage in interagency coordination on assessing risk to financially vulnerable communities, provide updates, and publish findings, such as advances made with the FLEC Climate Resiliency Group.Â
Consider the policy implications of climate-related financial risk supervision and regulation on LMI and BIPOC communities.Â
Ensure the inclusion of climate resiliency activities survives and is strengthened in the final CRA rule. Â
Provide recommendations and guidance to regulated financial institutions, including in the final Climate Principles, on how to assess climate-related financial risks specific to vulnerable and underserved communities and how to avoid inadvertently engaging in discriminatory practices (i.e. bluelining). Â
*These recommendations, all within the OCC’s mandate and authority, are designed to address climate-related financial risks and protect our financial institutions, financial system and communities.Â
Methodology
We assessed the extent to which the agency - consistent with its mandate and authorities and its membership in the Financial Literacy and Education Commission (FLEC) - has assessed and made progress on addressing climate risks to financially vulnerable communities. Â
“[C]oordinate the analyses of climate-related financial risks ... with their efforts to understand impacts on communities and households. FSOC members should, as applicable, integrate these analyses into the[ir annual] public reports.” (FSOC 1.6).Â
“[E]valuate climate-related impacts and the impacts of proposed policy solutions on financially vulnerable populations when assessing the impact of climate change on the economy and the financial system.” (FSOC 1.8). Â
“[FLEC members should] analyze and understand the impact of climate change on the financial well-being of financially vulnerable populations. FSOC members that are also FLEC members should actively participate in this analysis.” FLEC members include the Fed, OCC, FDIC, NCUA, SEC, CFTC, and FHFA. (FSOC 1.9). Â
Some Progress
Reasoning
In 2021, the OCC established the internal Climate Risk Implementation Committee to address climate risk, and a senior leadership roundtable for OCC decision-makers to discuss climate change-related issues affecting the OCC and banks. However, the OCC has not provided any public update on what these groups are focusing on other than the broad description provided in the FSOC report, and no related information is available on the OCC’s climate webpage.
Additionally, the OCC has made progress in collecting and requesting the data it needs to assess climate risk through public requests for information and comment. This includes requesting papers and research on climate risk and finance in banking, convening a symposium to discuss academic papers and policy research on climate risk in banking and finance, publishing the Principles for Climate-Related Financial Risk Management for Large Banks with a request for feedback, and requesting information from industry on climate risk management practices through the Climate Risk Range of Practice Questionnaire.
In its 2022 Bank Supervision Operating Plan, the OCC asserted that it will continue information gathering efforts and conduct additional industry outreach. It also indicated that examiners should focus on establishing a baseline understanding of the effects of physical and transition risks at the largest banks, including the development of climate risk management frameworks and governance processes. Likewise, the agency has conducted a “range of practice” activity review at the largest banks and is engaging with relevant stakeholders and larger banks to gather information as they build capabilities and risk management processes evolve.
In its update for the FSOC report, the OCC stated that its economists are conducting research into how the physical and transition risks of climate change translate into financial risks to the banking system, how these risks may create differential community impact and disproportionately affect certain groups, and how the OCC can develop an independent view of rating a bank’s exposure to climate risk.
Next Steps
Provide updates on the agency’s climate risk-related data collection and research, what additional data is needed, and its plan for collecting such data.Â
Provide easily searchable access to white papers, blogs, infographics, etc. that demonstrate data collection and research on climate-related financial risk.Â
Issue a request for information on available data, models, or other information that could be used, in addition to existing data, to inform the agencies on climate-related risks to the financial system and the economy, including data on the adverse financial effects of climate on LMI communities.Â
Conduct a horizontal review of large financial institutions that have significant exposure to climate risk to gain a better understanding of strategies and practices for risk identification and management, grouping banks with large exposures to climate risk or banks with loan concentrations in particularly vulnerable geographic areas. Â
Conduct a climate risk policy sprint with FFIEC members to develop common definitions and review current and evolving risks to financial institutions. Â
Develop a Climate Risk Assessment Tool similar to the Cybersecurity Assessment Tool with FFIEC members to help financial institutions (particularly smaller, community financial institutions) identify their climate-related financial risks associated, as well as their preparedness under various climate scenarios and actionable steps to mitigate risks.Â
*These recommendations, all within the OCC’s mandate and authority, are designed to address climate-related financial risks and protect our financial institutions, financial system and communities.Â
Methodology
We assessed the extent to which the agencies have advanced research and data collection on climate risk. Â
“Identify[] the data needed to evaluate the climate-related financial risk exposures of regulated entities and financial markets.” (FSOC 2.1).  Â
“Perform[] an internal inventory of currently collected and procured data and its relevance for climate risk assessments." (FSOC 2.1).  Â
“Develop[] a plan for procuring necessary data through data collection, data sharing arrangements and information purchased from data providers or other sources.” (FSOC 2.1).  Â
“[F]acilitate the sharing of climate-related data across FSOC members and non-FSOC member agencies to assess climate-related financial risk, consistent with data confidentiality requirements.” (FSOC 2.2)   Â
“[D]evelop consistent data standards, definitions, and relevant metrics ... to facilitate common definitions of climate-related data terms, sharing of data, and analysis and aggregation of data.” (FSOC 2.5)Â
No Progress
Reasoning
Ceres is not aware of any progress in this category.
Next Steps
Design and conduct climate scenario analysis exercises with financial institutions to assess safety and soundness and ability to withstand climate impacts, starting with those over $100 billion in assets, moving to over $50 billion then over $10 billion, and eventually to all regulated financial institutions irrespective of asset size. Â
Conduct climate scenario analysis exercises and stress tests that include physical and transition risks, disorderly transition, concurrent and consecutive risks, insurance gaps, impacts on multiple traditional risk categories, short- and long-term horizons, etc.Â
Increase capital requirements or buffers where the results indicate insufficient levels to absorb losses.Â
*These recommendations, all within the OCC’s mandate and authority, are designed to address climate-related financial risks and protect our financial institutions, financial system and communities.Â
Methodology
We assessed the extent to which the agencies have begun to assess, develop, and conduct climate scenario analyses at their supervised entities. Â
“[C]ollaborate with external experts to identify climate forecasts, scenarios, and other tools necessary to better understand the exposure of regulated entities to climate-related risks and how those risks translate into economic and financial impacts.” (FSOC 4.1).Â
“[U]se scenario analysis, where appropriate, as a tool for assessing climate-related financial risks, taking into account their supervisory and regulatory mandates and the size, complexity, and activities of regulated entities.” (FSOC 4.3).Â
“[C]onsider using common scenarios that build on existing work, including scenarios developed by NGFS and work at the FSB, as appropriate for the institutions and markets under consideration.” (FSOC 4.4).Â
Some Progress
Reasoning
The OCC’s December 2021 draft Principles for Climate-Related Financial Risk Management for Large Financial Institutions outlines guidance it expects its regulated entities to follow regarding climate risk management. The OCC, FDIC, and Fed have indicated that they intend to publish final climate principles jointly. However, there is no indication when the final guidance will be published.
Next Steps
Finalize the Climate Principles jointly with the Fed and FDIC. Â
Issue additional detailed, binding guidance on climate risk management, including scenario analysis guidance, net zero transition plans, and what banks need to do to meet their net zero commitments. Â
Expand guidance to smaller financial institutions, and account for the unique risks (i.e. geographic and sectoral concentration) these institutions face, while tailoring guidance to reflect these differences and supporting the education of bank boards and management on climate risk and why it matters to their bank.Â
Issue guidance through the FFIEC to raise awareness of climate risks, encourage financial institutions to integrate climate risks into their enterprise risk frameworks, and provide guidance on how to measure and mitigate risks, including through best practices.Â
Incorporate climate-related financial risk into the relevant Comptroller’s Handbooks to acknowledge that climate poses risks to the financial system and individual financial institutions, indicate that it is part of the OCC’s supervisory expectations, and provide financial institutions and examiners guidance on how to identify and monitor those risks based on established risk factors that are very familiar to banks and examiners. Â
Explicitly integrate climate risk into CAMELS ratings and bank examinations. Â
*These recommendations, all within the OCC’s mandate and authority, are designed to address climate-related financial risks and protect our financial institutions, financial system and communities.Â
Methodology
We assessed the extent to which the agencies have enhanced supervisory scrutiny of climate risk management at their supervised entities to ensure their resilience and the resilience of our financial system.                Â
“[C]larif[y] or enhanced risk management expectations ... [and] guidance.” (FSOC 4.8).Â
“[R]eview[] regulated entities’ efforts to address climate-related risks." (FSOC 4.6).
“[R]eview[] existing ... guidance ... to identify where clarifications and enhancements are needed.” (FSOC 4.7).Â
No Progress
Reasoning
Ceres is not aware of any progress in this category.
Next Steps
Propose and issue detailed regulation for climate-related financial risk management requirements.Â
*These recommendations, all within the OCC’s mandate and authority, are designed to address climate-related financial risks and protect our financial institutions, financial system and communities.Â
Methodology
We assessed the extent to which the agencies have incorporated climate risk management expectations into their regulatory requirements for supervised entities to ensure their resilience and the resilience of our financial system.
“[C]larif[y] or enhanced risk management ... requirements.” (FSOC 4.8).Â
“[R]eview[] existing regulations ... and regulatory reporting to identify where clarifications and enhancements are needed.” (FSOC 4.7).Â
No Progress
Reasoning
Methodology
We assessed the extent to which the agency has enhanced public reporting requirements for their regulated entities. The market is currently mispricing climate risk. The lack of consistent disclosure by entities supervised by U.S. financial regulators is an obstacle to market efficiency and to the accurate pricing of climate risk. Â
“[R]eview their existing public disclosure requirements and consider, as appropriate, updating them to promote the consistency, comparability, and decision-usefulness of information on climate-related risks and opportunities.” (FSOC 3.1).Â
“[C]onsider enhancing public reporting requirements for climate related risks in a manner that builds on the four core elements of the TCFD.” (FSOC 3.2).Â
“[C]onsider whether such disclosures should include disclosure of GHG emissions.” (FSOC 3.4).Â
“[R]eview banks’ public regulatory reporting requirements to assess whether enhancements are needed to provide market participants with information on institutions’ climate-related financial risks, taking into account a bank’s size, complexity, and activities.” (FSOC 3.7).Â
Notable Progress
Reasoning
The OCC has consistently and emphatically affirmed climate as a risk to the financial system. Acting Comptroller Michael Hsu has delivered numerous speeches and remarks publicly acknowledging the systemic nature of climate-related financial risk:Â
Acting Comptroller Hsu testimony in front of the House Committee on Financial Resources stating OCC will take proactive and concrete actions on climate risk (May 2021)Â
Acting Comptroller Hsu testimony in front of the Senate Committee on Banking, Housing, and Urban Affairs citing safety and soundness implications of climate change for banks (August 2021)Â
Acting Comptroller Hsu speech discussing priorities, including acting on climate change, and how climate risk represents a significant threat to trust in banking (September 2021)Â
Acting Comptroller Hsu statement supporting the Network for Greening the Financial System (NGFS) Glasgow Declaration on climate risk to the financial system (November 2021)Â Â
Acting Comptroller Hsu speech on the Five Climate Questions Every Bank Board Should Ask (November 2021)Â
Acting Comptroller Hsu remarks on climate risk management at the Institute of International Bankers Annual Washington Conference (March 2022)Â
Additionally, the OCC has included the risks presented by climate change to the financial system in its Spring 2021 Semiannual Risk Perspective, fiscal year 2022 Bank Supervision Operating Plan, Fall 2021 Semiannual Risk Perspective, 2021 Annual Report, and Spring 2022 Semiannual Risk Perspective. In July 2021, the OCC joined NGFS. The OCC also provided a detailed update to FSOC on its activities related to climate risk for the FSOC Report on Climate-Related Financial Risk (FSOC report). The agency endorsed the final FSOC report as well as its creation of FSOC’s Climate-Related Financial Risk Committee. Â
Most notably, the OCC published draft Principles for Climate-Related Financial Risk Management for Large Banks (climate principles) in December 2021 and requested feedback on the principles. These climate principles describe physical and transition risks banks are likely to face from climate change and outline general actions banks should take to address these risks.
Methodology
Recognizing that climate change poses a financial stability risk is a critical first step for all financial regulators and will send an important message to all financial market stakeholders. Such statements are particularly important, given the complex nature of climate risks and continuing ambiguities about the extent to which the issue falls under specific agency mandates.Â
We assessed the extent to which the agency has publicly affirmed the systemic nature of the climate crisis individually in official agency communications outside of the FSOC report.Â
Some Progress
Reasoning
In 2021, the OCC established the internal Climate Risk Implementation Committee to address climate risk, and a senior leadership roundtable for OCC decision-makers to discuss climate change-related issues affecting the OCC and banks. However, the OCC has not provided any public update on what these groups are focusing on other than the broad description provided in the FSOC report, and no related information is available on the OCC’s climate webpage.Â
Additionally, the OCC has progressed in collecting and requesting the data it needs to assess climate risk through public requests for information and comment. This includes requesting papers and research on climate risk and finance in banking, convening a symposium to discuss academic papers and policy research on climate risk in banking and finance, publishing the Principles for Climate-Related Financial Risk Management for Large Banks with a request for feedback, and requesting information from industry on climate risk management practices through the Climate Risk Range of Practice Questionnaire. Â
In its 2022 Bank Supervision Operating Plan, the OCC asserted that it will continue information gathering efforts and conduct additional industry outreach. It also indicated that examiners should focus on establishing a baseline understanding of the effects of physical and transition risks at the largest banks, including the development of climate risk management frameworks and governance processes. Likewise, the agency has conducted a “range of practice” activity review at the largest banks and is engaging with relevant stakeholders and larger banks to gather information as they build capabilities and risk management processes evolve. Â
In its update for the FSOC report, the OCC stated that its economists are conducting research into how the physical and transition risks of climate change translate into financial risks to the banking system, how these risks may create differential community impact and disproportionately affect certain groups, and how the OCC can develop an independent view of rating a bank’s exposure to climate risk. Â
However, there is no publicly available information identifying additional progress since last year on inventorying collected data and its relevance for climate risk assessments. The OCC has also not made public the data it has thus far collected from its research and RFIs and has not released a public plan for obtaining additional necessary data.Â
Next Steps
Publicly provide more detail on what data and research it has collected, including from its draft climate principles, and how the agency is going to use that data to meet the FSOC criteria. Â
*These recommendations, all within the OCC’s mandate and authority, are designed to address climate-related financial risks and protect our financial institutions, financial system and communities.Â
Methodology
Producing quality research and data is critical to assessing and addressing climate-related financial risks. As stated in the FSOC report, “Analyzing climate-related financial risks begins with measuring and assessing risks from climate impacts. To do this, data is needed that captures the drivers of physical and transition risks that could impact households, businesses, the economy, and the financial sector (page 48).” We incorporated this new category in the 2022 Scorecard to respond to these critical data gaps.Â
We assessed the extent to which the agency has advanced work to make progress on FSOC Recommendation 2.1:Â Â
“Identif[y] the data needed to evaluate the climate-related financial risk exposures of regulated entities and financial markets within the context of each FSOC member’s mandate and authorities; Â
Perfor[m] an internal inventory of currently collected and procured data and its relevance for climate risk assessments; and Â
Develo[p] a plan for procuring necessary data through data collection, data sharing arrangements and information purchased from data providers or other sources.”Â
Some Progress
Reasoning
In 2021, the OCC rescinded its harmful 2020 CRA rule and committed to working with the Fed and FDIC on an interagency rule. In February 2022, Acting Comptroller Hsu indicated climate would be included in the upcoming CRA proposed rule. Likewise, Acting Comptroller Hsu endorsed the FSOC report’s inclusion of the disproportionate impact of climate change on disadvantaged and financially vulnerable communities and mentioned the importance of addressing impacts of the disproportionate effect of climate change on financially vulnerable communities. Â
In May 2022, the OCC, FDIC, and Fed jointly released a notice of proposed rulemaking (NPR) to amend their regulations implementing the CRA. This NPR updates how CRA activities qualify for consideration, where CRA activities are considered, and how CRA activities are evaluated. This is an important step towards climate justice for LMI communities, as these communities are more likely to be located in vulnerable areas impacted by natural disasters, which are increasing in frequency and intensity, and thus disproportionately burdened by the associated financial risks and losses.Â
For the first time, loans, investments, or services that promote climate resiliency and disaster preparedness qualify as community development activities. These activities are those that benefit residents in one or more of the targeted census tracts, do not displace or exclude LMI residents in those tracts, and are conducted in conjunction with a government plan or initiative focused on disaster preparedness or climate resiliency that includes an explicit focus on benefitting a geographic area that includes that tract. Activities that qualify may thus include funds to family farmers facing drought or LMI communities shifting to renewable energy resources. Similarly, disaster preparedness and climate resiliency activities in Native Land Areas qualify as community development activities if specifically targeted to and conducted in Native Land Areas, benefit LMI residents in the area, do not displace or exclude LMI residents in the area, and are conducted in conjunction with a government plan or initiative focused on disaster preparedness or climate resiliency that benefits residents of that area. Â
Additionally, the NPR includes numerous questions related to inclusion of climate resiliency on which the agencies request feedback. These questions include whether any additional criteria is necessary to ensure LMI communities benefit from disaster recovery activities; how climate resiliency and disaster preparedness activities should be tailored to directly benefit LMI communities; whether activities that promote energy efficiency should be included in the definition of climate resiliency and disaster preparedness, or included under affordable housing definitions; and whether certain climate resiliency and disaster preparedness activities that benefit LMI communities should qualify regardless of residence in targeted geographies.
Next Steps
Ensure the inclusion of climate survives and is strengthened in the CRA final rule. Â
Actively and transparently engage with FLEC to assess the resilience of financially vulnerable populations, and assign specific staff to work with FLEC on these issues. Â
*These recommendations, all within the OCC’s mandate and authority, are designed to address climate-related financial risks and protect our financial institutions, financial system and communities.Â
Methodology
The FSOC report highlights the imperative to assess climate risks on “financially vulnerable communities,” given that “climate change disproportionately affects financially vulnerable populations potentially including lower-income communities, communities of color, Native American communities, and other disadvantaged or underserved communities.” This troubling reality is further compounded by the fact that vulnerable communities are “less likely to have the resources to protect and guard against damage to their properties or adequately deal with loss of income from an adverse climate or weather event (page 22).” While the significance of this issue is emphasized, it is qualified by an important warning against measures or actions that may unintentionally worsen existing inequalities.Â
We assessed the extent to which each agency, consistent with its mandate, authorities, and its membership in the Financial Literacy and Education Commission (FLEC), has advanced work to make progress on FSOC Recommendations 1.8 and 1.9: Â
“members, consistent with their mandates and authorities, evaluate climate-related impacts and the impacts of proposed policy solutions on financially vulnerable populations when assessing the impact of climate change on the economy and the financial system.” (FSOC 1.8)Â
“Treasury Department engage other members of the Financial Literacy and Education Commission (FLEC) to analyze and understand the impact of climate change on the financial well-being of financially vulnerable populations. FSOC members that are also FLEC members should actively participate in this analysis.” (FSOC 1.9). Â
FLEC members include the Office of the Comptroller of the Currency, Federal Reserve, the Federal Deposit Insurance Corporation, National Credit Union Administration, Securities and Exchange Commission, Commodity Futures Trading Commission. Â
Notable Progress
Reasoning
In July 2021, the OCC appointed Darrin Benhart as climate change risk officer to head its climate risk initiatives. After Benhart retired in April 2022, the OCC appointed Jonathan Fink as interim climate change risk officer. Â
Next Steps
Provide public details on what the OCC’s Climate Risk Implementation Committee has accomplished so far, which other staff have been assigned to the committee, and what the committee’s budget and resources are. Â
*These recommendations, all within the OCC’s mandate and authority, are designed to address climate-related financial risks and protect our financial institutions, financial system and communities.Â
Methodology
It is urgent that agencies establish sustainable, well-resourced capacity at the political and technical levels to address climate risk to meet the scale of the challenge and deliver on the administration and FSOC commitments.
We assessed the extent to which the agency has appointed dedicated staff to address climate risk to execute the agency’s climate commitments and FSOC recommendations. We assess, for example, the role, authority, and human and financial resources provided to staff dedicated to work on climate risk.Â
No Progress
Reasoning
In its draft climate principles, the OCC requested information on what existing regulatory reporting requirements could be augmented to better capture banks’ exposure to climate-related financial risks. However, the climate principles did not specify whether or how the agency will use the resulting information to review and potentially enhance its existing public disclosure requirements. Although the OCC has the authority to amend uniform disclosure systems such as the Call Report with other Federal Financial Institutions Examinations Council (FFIEC) members, there is no public information to indicate any action in this area.Â
Methodology
The market is currently mispricing climate risk. The lack of consistent disclosure by entities supervised by U.S. financial regulators is an obstacle to market efficiency and to the accurate pricing of climate risk. In response, the FSOC recommended that members:Â
“review their existing public disclosure requirements and consider, as appropriate, updating them to promote the consistency, comparability, and decision-usefulness of information on climate-related risks and opportunities, consistent with their mandates and authorities.” (FSOC 3.1) Â
“consider enhancing public reporting requirements for climate related risks in a manner that builds on the four core elements of the Task Force on Climate-Related Financial Disclosure (TCFD)” (FSOC 3.2)Â
“consider whether such disclosures should include disclosure of GHG emissions” (FSOC 3.4)Â
Following on FSOC Recommendations 3.1, 3.2, 3.3, and 3.4, we assessed the extent to which the agency has enhanced public reporting requirements, consistent with its statutory mandates.Â
Some Progress
Reasoning
In December 2021, the OCC issued draft Principles for Climate-Related Financial Risk Management for Large Banks, outlining guidance it expects its regulated entities to follow regarding climate risk management. The agency indicated that it plans to finalize the climate principles, develop more detailed expectations by risk area, and review the large banks’ progress toward establishing climate risk management capabilities. Â
The OCC has also indicated it will “continue to monitor the development of climate-related financial risk management frameworks at large banks,” and that such supervision” will focus on safety and soundness considerations and integration of climate-related financial risk into bank risk management frameworks.” OCC examination teams for large banks will “integrate...climate-related financial risk into supervision strategies and…engage with bank management to better understand the challenges banks face in this effort, including identifying and collecting appropriate data and developing scenario analysis capabilities and techniques.” Â
However, the climate principles will not be binding, and there is no indication whether the climate principles or supervision strategy described above will be incorporated into the relevant Comptroller's Handbooks.
Next Steps
Amend uniform disclosure systems such as the Call Report with other FFIEC members. Â
Ensure the final climate principles and any subsequent detailed guidance contain disclosure requirements. Â
Ensure subsequent detailed guidance is explicitly binding under the OCC’s safety and soundness authority, and that such guidance is incorporated into the relevant Comptroller’s Handbooks. Â
*These recommendations, all within the OCC’s mandate and authority, are designed to address climate-related financial risks and protect our financial institutions, financial system and communities.Â
Methodology
Supervision and regulation of climate risk is urgently needed to ensure the resilience of supervised entities and our financial system. Â
Following FSOC Recommendations, we assessed the extent to which the agency has “clarified or enhanced risk management expectations, guidance and requirements (FSOC 4.8).” We will also consider if agencies have:Â
“reviewed regulated entities’ efforts to address climate-related risks (FSOC 4.6)Â
“reviewed existing regulations, guidance and regulatory reporting to identify where clarifications and enhancements are needed” (FSOC 4.7)Â
The Office of the Comptroller of the Currency (OCC) is an independent bureau of the U.S. Department of the Treasury. The OCC charters, regulates, and supervises all national banks, federal savings associations, thrift institutions, and federal branches and agencies of foreign banks. The OCC coordinates with the FDIC and Federal Reserve on maintaining the safety and soundness of the U.S. banking sector. Â
The OCC ensures that the banks it supervises operate in a safe and sound manner, provide fair access to financial services, treat customers fairly and equally, and comply with applicable laws and regulations. The OCC helps banks be leaders in safe and sound community development financing and in making financial services accessible to underserved communities and consumers. Â
OCC examiners conduct on-site reviews of banks and provide ongoing supervision of the banks’ operations. The OCC issues rules and regulations that govern the banks it supervises, taking supervisory actions against banks that do not comply with these statutes or that otherwise engage in risky practices.Â
If climate risk remains unaddressed in the economy by regulators, financial institutions across the country will face risks throughout their lending portfolios. Climate risk – and its associated economic and financial market consequences – directly and indirectly impacts bank balance sheets, strategies, and operations, and could increase credit, market, liquidity, and operational risk at financial institutions. Because this will implicate the safety and soundness of both individual firms and the financial system as a whole, the OCC must understand and address these risks.
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