There’s been a steady drumbeat in recent weeks from reports that have a common thread: The threat of climate change hasn’t taken a hiatus during the coronavirus pandemic.
Being reminded of the world’s other existential crisis doesn’t seem fair right now, but there’s no hiding from that one, either.
The scientific analyses of climate change are even more urgent than before, which almost didn’t seem possible.
But what has stood out is that major business interests and investors are publicly warning that climate change likely will be devastating to the economy and the markets if the Federal Reserve Board and other regulators don’t take action.
That may finally obliterate the fading narrative that policies aimed at combating climate change harms economic growth because it takes the threat beyond the realm of scientists, environmentalists and “green” politicians and places it in the middle of Wall Street.
Meanwhile, the growing theme that the economy can thrive while taking on climate change is the major take-away from a study released Tuesday by the World Resources Institute. That report concludes dozens of states have reduced carbon emissions while expanding their economies in recent years.
But it was the blunt letter signed by more than 70 public and private bipartisan leaders to Federal Reserve Board Chairman Jerome Powell that gained headlines in the financial press, including Forbes, CNBC, The New York Times and others.
“It is more clear than ever that the climate crisis poses a systemic threat to financial markets and the real economy, with significant disruptive consequences on asset valuations and our nation’s economic stability,” said the letter, which was signed by 40 investment firms and organizations that manage some $1 trillion in assets.
“This is in addition to the lives and livelihoods of tens of millions of people across the country. These threats have the potential to compound in ways we don’t yet understand, with disastrous impacts the likes of which we haven’t seen before.”
Similar letters were sent to the federal Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Securities and Exchange Commission, Commodity Futures Trading Commission and other regulatory agencies.
Whether that immediately moves the needle toward drastic action that scientists for years have been urging seems unlikely in the immediate future and then may depend on the outcome of the November presidential election.
President Donald Trump has been going in the opposite direction, rolling back dozens of environmental regulations. Former Vice President Joe Biden, the presumptive Democratic nominee, focuses much of his economic recovery plan on the development of clean energy and green jobs.
Trump once said of his own administration’s report that climate change would wreak havoc on the U.S. economy: “I don’t believe it.“
He does pay attention to the markets, but for now they have rebounded after an initial dive during the early stages of the pandemic.
He also pays attention to polls. American adults by large majorities support increased efforts to protect the environment and combat climate change — numbers that have grown steadily over the years, according to a Pew Research Center report last fall.
But — you guessed it — there’s a deep partisan split between Democrats and Republicans. Democrats overwhelmingly agree that efforts to reduce the effects of global climate change do more good than harm for the environment. A strong majority of Republicans say such policies either make no difference or do more harm than good.
Trump rarely wavers from positions favored by his political base.
Nevertheless, it’s the second time this summer that major financial voices in the U.S. have differed significantly with the president on notable policy matters. In late June, Goldman Sachs issued a study concluding a national mandate to wear facial masks would not only save lives during the COVID-19 outbreak, but avoid a 5 percent drop in the gross domestic product.
Trump has not called for such a policy. Amid growing pressure, he has relented in his reluctance to suggest people should wear masks, but has hardly given it his full-throated support.
The letter to Powell was sent out under the letterhead of the Ceres investment network, a “sustainability nonprofit organization” that works with some of the nation’s biggest businesses and investors.
The letter said climate change actions by the Fed “are particularly critical now, as our financial markets are especially vulnerable in the face of the economic shocks from the COVID-19 pandemic.”
The top recommendations include uniform regulations for financial institutions to measure and disclose the impact their loans and investments have on emissions, and integrating climate into risk assessments to prevent economic downturns and manage financial stability, according to CNBC.
Various financial firms — JPMorgan Chase, Bank of America and Wells Fargo, to name a few — already have been heading in that direction.
“Investors worry that if regulators do not act, climate change may cause the price of some companies to fall suddenly, the effects of which may ricochet through the economy,” said The New York Times in a report about the letter.
Requiring information about such things as greenhouse gas emissions or what facilities may be threatened by rising seas “might encourage companies to lower their emissions, or risk losing access to investment or affordable insurance coverage,” according to the Times.
The letter was issued around the same time new research was published that narrows the potential increase in the Earth’s temperature range, with the low end much higher than the previous estimate.
As countries spend trillions of dollars to stabilize their economies during the pandemic, Time magazine took the opportunity to note that scientists for years have looked at 2020 as a potential point of no return for big action and big spending to start reversing climate change trends.
It’s no surprise, then, that the investors didn’t think their message could wait.