Working in climate risk management at a US bank this past decade, you’d be forgiven for having a little whiplash.
Starting around 2015, central banks and financial supervisors started probing lenders on their climate risk practices, eager to head off potential bank failures and system-wide stresses because of mounting extreme weather risks and the shift to a net-zero economy.
In the space of a few years, Wall Street became home to a new wave of risk management professionals, including climate risk modelers, sustainability analysts, and stress-test specialists. Public institutions — from the Bank of England to the Federal Reserve — also skilled up with climate risk-savvy professionals.
At this time, one of the movers and shakers in this niche was today’s guest Kevin Stiroh — an Executive Vice President at the Federal Reserve Bank of New York and later a Senior Advisor to the Board of Governors itself — who ran point for the central bank on several major climate supervisory initiatives.
Then, President Trump was re-elected. ‘Climate’ became a dirty word, and a host of central banking initiatives targeting banks’ safety and soundness in the face of physical and transition risks were quietly shelved.
Following the change in administration, Stiroh joined DC-based think tank Resources for the Future, where he continues to fly the flag for climate-aware risk management across the financial system, including by helping establish the Climate-related Financial and Macroeconomic Risk Initiative in concert with Harvard’s Salata Institute.
In this episode, Stiroh reflects on the climate-related efforts of the Federal Reserve and offers his view on the state of bank climate risk management today. He also expounds on his new role at Resources for the Future, and his hopes for the climate risk profession amidst fierce political headwinds.
For those interested in the past, present, and future of climate-related financial risk management, this is a must-listen.
Listen below, download from the Podcasts page on Climate Proof, or tune in via Spotify or Apple Podcasts.
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We talk about:
👉 Why climate is a traditional risk management issue for banks, and why that framing is the only legitimate basis for supervisory engagement
👉 How US bank climate risk supervision rose and fell in the decade from 2015
👉 What the Fed’s climate scenario analysis revealed — and where it fell short
👉 Why climate-related financial risk management focus has shifted from transition to physical risk
👉 What Kevin is building at Resources for the Future — including a research collaboration with Harvard to fill the gap left by the US official sector pullback, bringing together academia, private sector, and nonprofits to develop more durable climate risk frameworks
Thanks for listening!
Louie Woodall
Editor
