US Treasury Secretary Janet Yellen delivers remarks on “Next steps in the evolution of development finance” at the Center for Strategic and International Studies (CSIS) in Washington, US, 9 February, 2023.
Leah Millis | Reuters
Treasury Secretary Janet Yellen warned on Tuesday that climate change is already having a major economic impact in the US and could cause significant losses to the financial system in the coming years.
Yellen made the comments at the first meeting of the Climate-Related Financial Risk Advisory Committee (CFRAC), an advisory board established last year by the Financial Stability Research Council in an effort to support US action to reduce climate risk to the economy. .
“As climate change worsens, natural disasters and warming temperatures can lead to declines in asset values that can permeate the financial system,” she said at the meeting. “A delayed and chaotic transition to a zero-net economy can also affect the financial system.”
Climate-related disasters have caused economic losses through infrastructure damage, disruption of emergency services and loss of property values, according to a federal government report released last year. The US saw an average of nearly eight $1 billion disasters per year over the past four decades. In the past five years, that number has jumped to nearly 18 incidents per year.
“These effects are not hypothetical,” Yellen said. “They’re already playing out.”
Yellen said that states such as California, Florida and Louisiana have suffered from particularly severe storms and wildfires, and noted that tornadoes across the South and intense storms on the West Coast indicate that climate change is accelerating.
She said some insurers are raising rates or even withdrawing from high-risk areas in response to rising losses.
“This could have a devastating effect on homeowners and their property values,” Yellen said. “Developments like this can spill over into other parts of our interconnected financial system.”
The Biden administration has taken action to address the climate risk to the economy, including a pending Securities and Exchange Commission measure requiring publicly traded companies to disclose their greenhouse gas emissions. The agency is now considering rolling back its climate disclosure rule.
Yellen has promoted historic climate investments in President Biden’s Inflation Reduction Act, particularly building on the law’s tax credits and other private sector incentives that target energy costs for consumers and reduce greenhouse gas emissions.
Watch: Possible relaxation of climate disclosure rules
