- Treasury Secretary Janet Yellen warned Tuesday that climate change could cause losses in the value of assets throughout the country’s financial system in the coming years.
- Yellen’s remarks came during the first meeting with the Advisory Committee on Climate-Related Financial Risks.
- “A delayed and uncontrolled transition to a net-zero economy can lead to shocks to the financial system as well,” Yellen said.
US Treasury Secretary Janet Yellen receiving remarks on “Next Steps in the Evolution of Development Finance” at the Center for Strategic and International Studies (CSIS) in Washington, US, February 9, 2023. \
Leah Mellis | Reuters
Treasury Secretary Janet Yellen warned on Tuesday that climate change is already taking a significant economic toll on the United States and could take a huge toll on the financial system in the coming years.
Yellen made the remarks during the first meeting with the Climate Financial Risks Advisory Committee (CFRAC), an advisory board created last year by the Financial Stability Oversight Board in an effort to advance US measures to reduce climate risks to the economy. .
“As climate change intensifies, natural disasters and higher temperatures can drive down asset values that can travel through the financial system,” she said during the meeting. A delayed and uncontrolled transition to a net-zero economy can lead to shocks to the financial system as well.
Climate-related disasters have caused economic losses through damage to infrastructure, disruption of critical services, and losses in property value, according to a Federal government report Released last year. The United States has experienced an average of nearly eight billion-dollar disasters each year over the past four decades. In the past five years, that number has jumped to nearly 18 events annually.
“These effects are not hypothetical,” Yellen said. “They are already playing.”
Yellen said states like California, Florida and Louisiana have recently been hit by severe storms and wildfires, and she noted that hurricanes across the South and severe storms on the West Coast indicate that climate change is accelerating.
She said some insurers are raising interest rates or cutting back on high-risk areas in response to higher losses.
“This has the potential to have dire consequences for homeowners and their property values,” Yellen said. “Such developments could spill over into other parts of our interconnected financial system.”
The Biden administration has taken executive action to address climate risks to the economy, including an imminent action by the Securities and Exchange Commission that would require publicly traded companies to disclose greenhouse gas emissions. The agency is now considering scaling back the proposed climate disclosure rule.
Yellen previously touted historic climate investments in President Biden’s Inflation Control Act, which specifically promotes legislation tax breaks and other private sector incentives aimed at lowering consumers’ energy costs and domestic greenhouse gas emissions.
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