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There are few things more devastating to a country’s economy than a full-blown financial crisis. In the US, the memory of the near-implosion of the banking industry in 2008-2009 is seared into the minds of policymakers. It may be hard to recall just how calamitous that event was with fifteen years’ distance — but at its nadir the US unemployment rate surged to 10%, and economic output shrank 4.3%.
No wonder regulators are preoccupied with avoiding a repeat. One potential vector for a future crisis is unaddressed climate risk. An ever-growing barrage of extreme weather events — coupled with intensifying slow-onset events like sea-level rise and temperature variability — could disrupt bank portfolios and trigger cascading losses throughout the financial system, reviving the specter of 2008.
During the Biden administration, banking watchdogs took steps to guard lenders and savings associations from these hazards and encourage them to level up their climate risk management capabilities.
One of these regulators is today’s guest, Yue ‘Nina’ Chen, who served as Chief Climate Risk Officer at the Office of the Comptroller of the Currency from 2022 until January of this year.
In this episode, Nina shares how she built the OCC’s climate risk function from the ground up, educating lenders and bank supervisors alike on the challenges that a warmer, more volatile climate poses to financial stability. We discuss her role developing and implementing the regulator’s climate risk principles for large institutions — which offered first-of-its-kind guidance to Wall Street giants on climate-proofing their portfolios — and integrating climate considerations into the OCC’s supervisory practices.
She also shares her thoughts on the future of bank climate risk management now the Trump administration has taken a wrecking ball to climate resilience efforts across the federal government and explains why she thinks lenders need to level up their modeling and analysis of physical climate threats.
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:
👉 How Nina established the climate risk function at the OCC, educated internal stakeholders, and created frameworks to assess how climate impacts bank operations, clients, and markets
👉 The development and reception of the joint climate risk management principles she co-authored, and what their rollback under the Trump administration means for climate resilience in the banking sector
👉 The uneven progress made by US banks on addressing climate risks and the impact of regulatory backsliding
👉 What climate risk blind spots persist in the banking sector, including their overreliance on historical disaster patterns, limited attention to compounding risks and extremes, and inadequate focus on heatwaves and water stress
👉 Her plans to focus on climate- and nature-related financial risks in developing economies, where climate impacts are severe but financial systems are less resilient
Thanks for listening!
Louie Woodall
Editor
