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Climate-Related Financial Risk “Playing Out Now”, warns Yellen

US Secretary of the Treasury Janet Yellen has warned that the risks to the financial system from climate change are playing out now in her first meeting of the Climate-related Financial Risk Advisory Committee (CFRAC), the first external advisory committee of the Financial Stability Oversight Council (FSOC). The CFRAC will help the FSOC gather information on and analysis of climate-related financial risks. In her speech, Secretary Yellen said as climate change intensified, natural disasters and warming temperatures could lead to declines in assets values cascading through the financial system. She noted these impacts “are already playing out”, pointing to a five-fold increase in the annual number of billion-dollar disasters over the past five years compared to the 1980s, even after adjusting for inflation. She highlighted that in response to rising insured losses, some insurers were raising rates or even pulling back from high-risk areas. This has potentially devastating consequences for homeowners and their property values. Developments like these can spill over to other parts of our interconnected financial system,” she said.  

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