As expressed in President Biden’s Executive Order on Climate-Related Financial Risk, a whole-of-government approach will lead to greater understanding of the financial risks that climate change poses, and to the development of effective strategies to mitigate those risks.  The CFTC should be at the forefront of financial regulatory efforts to understand, and identify actions to mitigate, climate-related financial risks that impact CFTC-regulated markets.  This Request for Information reflects the Financial Stability Oversight Council’s recommendations for U.S. financial regulators, seeks climate-related data, and asks questions about the appropriate role of the CFTC in this emerging space.[1]

I support the Commission’s Request for Information because it seeks public input on both physical risks and transition risks related to climate issues that impact our markets.  First, the Commission can benefit significantly in understanding physical climate risk directly from those in our markets who bear the risk.  Second, the United States has an opportunity to be a leader in emerging voluntary carbon/sustainability markets, and public input can help realize that opportunity.

As a market regulator, the CFTC’s mission is to promote the resilience, vibrancy and integrity of our derivatives markets.  Commodities markets have been impacted by significant climate disasters such as wildfires, hurricanes, flooding, and other disaster events that have caused devastating financial losses to farmers, ranchers, and producers—losses that impact our derivatives markets. In determining how to promote the resilience and vibrancy of these markets, it is appropriate for the Commission to seek data and input on climate-related physical risk from those in our markets who bear the brunt of that risk as well as the public.  The Commission should be thoughtful and deliberate in any future action, and consider potential consequences on farmers, ranchers, and producers.

Additionally, the Commission’s role extends to promoting responsible innovation, which includes the evolution of climate/sustainability products in our markets.  There is a growing global market demand for derivatives products that could serve as a hedge against both physical risks of climate change as well as transition risks as companies move toward a net zero environment.  With a growing number of companies making net zero pledges, there is notable interest in carbon offset or sustainability products.  However, concerns about transparency, credibility, and greenwashing may hamper the integrity and growth of these markets.  I look forward to public input on whether there are customer protections, guardrails or standards that the Commission should consider as part of its mission to promote market integrity and transparency and to keep our markets free of fraud and manipulation.  The Commission has a critical role to play to ensure that our markets remain the strongest and safest in the world.