CFTC report highlights climate risks, need for risk assessments


CFTC report highlights climate risks, need for risk assessments

Climate change poses a major risk to the U.S. financial system, according to a new report by a Commodity Futures Trading Commission subcommittee.

CFTC Commissioner Rostin Behnam says extreme weather events like recent hurricanes, wildfires, and the derecho will likely worsen in the future. He says the report can help policymakers, regulators, and stakeholders build a climate-resilient financial system.

The report says traders dealing in ag commodities must adapt to physical risks by coming up with new ways to value, price, and manage climate risks.

The report also finds that financial markets “will only be able to channel resources efficiently to activities that reduce greenhouse gas emissions if an economy-wide price on carbon is in place at a level that reflects the true social cost of those emissions. Addressing climate change will require policy that incentivizes these reductions.

A financial system that can measure and manage these risks will be better positioned to recover from climate-related shocks, the report says.

Cargill’s John Hartmann served on the committee that formed the report. He says Cargill believes the path forward should generate positive incentives that realize the potential of agricultural-based climate change solutions and avoid adding financial strain to farmers.

The report was released by the Commodity Futures Trading Commission’s Climate Related Market Risk Subcommittee of the Market Risk Advisory Committee.