Whitehouse, Warren Launch Investigation into Major Banks’ Abandonment of Climate Risk Management Initiatives

Financial institutions’ failure to address climate risks is raising costs for families and undermining the U.S. economy

Washington, D.C.—Senator Sheldon Whitehouse (D-RI), Ranking Member of the U.S. Senate Committee on Environment and Public Works (EPW), and Senator Elizabeth Warren (D-MA), Ranking Member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, launched a probe into major banks that are capitulating to pressure from Republicans and the fossil fuel industry to abandon climate risk management strategies.  Failure to address growing climate harms is already raising costs for families and risks wiping out $1.4 trillion in American real estate value within the next 30 years, destabilizing the U.S. economy, and triggering a 2008-style financial crisis.

Bank of America, Citibank, JP Morgan, and Wells Fargo all claim to support the Paris Climate Agreement and made a range of commitments to address growing economic and environmental risks from climate change, including pledging net zero financed emissions by 2050 and pledging to stop financing new coal mines, coal-fired power plants, and Arctic oil and gas drilling projects.  But in response to bad-faith attacks from Republicans ginned up by the fossil fuel industry—and despite growing risks to banks’ own business models and the global financial system—these financial institutions have reneged on their climate risk management initiatives, withdrawn from international climate and sustainability organizations, and put the U.S. economy in increased jeopardy, threatening families’ economic security.

These banks’ “retreat from … climate risk management strateg[ies] poses risks to the U.S. financial system and broader economy given [their] designation as … systemically important financial institution[s] and the increasing likelihood that climate change poses systemic risks to the economy,” wrote the Ranking Members.

Public reporting and non-partisan watchdog organizations have uncovered that these banks’ “retreat from … sensible climate risk management strateg[ies] appears to be informed not by sound analysis of the risk climate change poses to [their] business[es], but rather by bad-faith attacks from the Republican Party and its fossil fuel allies. It cannot be overstated the extent to which Republican attacks on climate risk management practices—frequently referred to as ESG by critics—were part of a campaign funded and orchestrated by the fossil fuel industry,” continued the Democratic leaders.

Economy-wide costs from climate change are mounting.  Across the country, families are already facing an insurance affordability crisis.  Last Congress, the Senate Budget Committee—led by then-Chairman Whitehouse—collected national and county-level non-renewal data from more than 40 insurance companies and found that counties with the greatest climate risk also had the highest non-renewal rates, an early warning sign of market destabilization.  Such instability in insurance markets can make it impossible to get a mortgage, which can trigger a widespread crash in property values that cascades into a full-scale financial crisis.  Recently, Fed Chair Jerome Powell testified before the Senate Banking Committee that in “10 or 15 years there are going to be regions of the country where you can’t get a mortgage,” and research from The Economist estimated that losses to the global asset management industry from the direct and indirect physical risks of climate change will be between $4.2 trillion and $13.8 trillion by 2100.

“Retreat from prudent climate risk management strategy presents substantial risks to the U.S. financial system, with significant consequences for families and businesses nationwide.  The economic and financial risks posed by climate change are clear and growing and implicate fiduciary obligations.  No industry-funded, fact-free, partisan attacks on responsible corporate practices can justify such a retreat,” concluded Ranking Members Whitehouse and Warren.

The Senators are requesting answers about the financial institutions’ decisions to abandon commonsense climate-risk management initiatives and jeopardize the entire economy by June 2, 2025.

The full letters are available here.