Landmark Climate Risk Management Principles for Large U.S. Financial Institutions

On October 24, 2023, the U.S. Federal bank regulatory agencies (Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency) released Principles for Climate-Related Financial Risk Management for Large Financial Institutions. The Principles are intended to provide large U.S. financial institutions with a “high-level framework for the safe and sound management of exposures to climate-related financial risks.”

 The Principles represent the first actual intervention from U.S. regulators to support financial institution boards of directors and management in the incorporation of climate into their risk frameworks and practices. The Principles cover six areas: governance; policies, procedures, and limits; strategic planning; risk management; data, risk measurement, and reporting; and scenario analysis. Regarding Governance, the Principles outline the respective responsibilities of the Board and Management.