How is climate risk connected to the San Francisco Fed’s mission?
The Federal Reserve’s job is to promote a healthy, stable economy. This requires us to consider current and future
risks—whether we have a direct influence on them or not. Climate change is one of those risks.
The impacts of a changing climate—including the frequency and magnitude of severe weather events—affects each of our
three core roles:
- Conducting monetary policy
- Regulating and supervising the banking system
- Ensuring a safe and sound payment system
In order to meet our mission, we need to study and understand how a changing climate may disrupt the safety and
soundness of our economy and financial and payment systems. In turn, we’re assessing how to incorporate these findings
into our core functions and mandates, focusing on research, supervision, community, and operations.
What are the economic impacts of climate risk?
Climate risk manifests through physical risks—such as the loss of a physical asset due to storms or rising sea
levels—and transitional risks associated with the transition from a high-carbon economy to a low-carbon one, including
new technology, policies, consumer preferences, regulation, and market sentiment. These risks challenge the resiliency
of the firms we supervise and the communities we serve along with their ability to withstand climate impacts,
particularly in the case of low-and moderate-income communities and communities of color.
How we’re responding to climate risk
Here at the SF Fed, we’re on a journey to understand climate risk and resilience implications on the economy and
financial and payment systems while taking stock of our own climate impacts. We are doing this by focusing on
research, banking supervision, community, and operations.
Research: Understanding the economic impact of climate risk
Our Economic Research team has established a dedicated Sustainable Growth team that
focuses on assessing the effects of a changing climate on the economy. Additionally, the team is participating in the
research workstream for the Network for Greening the Financial System (NGFS).
Key research events and publications:
- How
Are Businesses Responding to Climate Risk? (2022) - Strategies for Equitable
Finance (2021) - Climate
Change and the Federal Reserve (2019) - The Economics of Climate Change
Conference (2019)
Supervision: Assessing climate risk with our banking partners
Our Supervision + Credit team is in the early stages of understanding climate-related risks
and how climate change and the financial system interact. We are engaging with large banks to strengthen our
understanding of how they assess climate risks and incorporate climate-related physical and transitional risks into
their risk management frameworks.
How we are learning:
- Supervision Climate Committee, which brings together senior staff from the Federal Reserve Board and Reserve Banks
across the System to ensure supervised firms are resilient to climate-related financial risks - Financial Stability Board
- Basel Committee’s Task Force on Climate-Related Financial Risks
- Network for Greening the Financial System
Community: Building equitable climate resilience
Given our commitment to promoting an economy that leaves no one behind, we also need to understand the disparate
impacts of climate change on low- and moderate-income communities (LMI) and communities of color in the Twelfth
District. To that end, we are engaging with governments, businesses, community-based organizations, and individuals in
our District to learn firsthand how climate change is affecting their day-to-day lives and livelihoods.
Our Community Development team is focusing on helping communities understand
climate risk and strategies for developing equitable community resilience to ensure all communities, including LMI
communities and communities of color, have what they need to thrive and remain economically stable in the face of
climate-related events.
Operations: Mitigating our climate impact
The Fed is not involved in climate mitigation policies. However, we realize our operations and the environment are
interconnected—and this interconnection has an impact on everyone. Through the cross-functional work led by our Social
Responsibility team, we are doing our part to mitigate carbon in our operations and avoid future emissions.
To that end, the Bank has a long-standing sustainability program dedicated to continuous improvement and investing in
renewable technologies. Through the cross-functional work led by our Social Responsibility team, we are currently
measuring carbon in our operations and supply chain and developing guidance on how to lessen our environmental
impacts.
Key initiatives:
- Measure carbon in our operations and supply chain
- Determine opportunities for environmental efficiencies
- Develop guidance on how to lessen our environmental impacts
Recent Publications
Community Development Research Brief
Climate-Related Risks Faced by Low- and Moderate-Income Communities and Communities of Color: Survey Results
Economic Letter
Climate
Change Costs Rise as Interest Rates Fall
SF Fed Blog
Three
Takeaways from “Addressing Climate Risk through Equitable Community Development” Webinar
President’s Speech
Climate
Risk and the Fed: Preparing for an Uncertain Certainty
Events
December 16, 2021, Virtual Seminar on Climate Economics
Presenter: Ben Groom, London School of
Economics
January 13, 2022, Virtual Seminar on Climate Economics
Presenter: Sir David Hendry, University
of Oxford
Questions?
For more information about our climate risk work, please reach out to us at sf.climate@sf.frb.org
The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.