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ABA: The American Bankers Association
Issue

Climate Change and Banking

ABA Position

America's banks recognize the global challenge posed by climate change, and banks of all sizes are already helping finance the transition to a more sustainable and inclusive low-carbon economy, while taking steps to reduce their own environmental impact. We stand ready to engage with all stakeholders in a constructive conversation on the appropriate role for the banking sector to play in addressing climate change. We believe common-sense, market-based solutions provide the best opportunity for addressing this world-wide issue, and every effort should be made to prevent or minimize economic dislocation during the transition. With the right policies, the United States can lead the effort to combat climate change.

There is much more that needs to be learned about climate change and how it affects our economy, which is why we support careful and deliberate study to inform the policy debate. That includes ensuring that prudential regulations focus on actual risks and that regulators develop standardized definitions and principle-based disclosure guidance focused on material risks. Banks should not be used as a tool to implement societal changes or regulate customers. Only elected officials should be making the difficult decisions needed to guide the nation’s climate policy.

We believe that direct policy measures to cut greenhouse gas emissions are the most efficient way to deliver on climate goals. If future climate-related financial regulatory or supervisory requirements are deemed necessary, these should be proportionate, risk-based, informed by consultation and grounded in robust data-driven analysis. Policy makers should also weigh the impact a given policy may have on smaller institutions, customers and clients that may be particularly affected by a transition to a lower carbon future—including in energy and agriculture—focused communities.

Key areas where policy makers are focusing their attention and where ABA will engage to ensure that banks’ interests are well represented include:

Risk Management & Disclosure Requirements

ABA believes that prudential regulations should focus on actual risks banks face, and that regulators should develop standardized definitions and principle-based disclosure guidance focused on material risks. Bank regulators should focus on development of scenario analysis methodologies to accurately gauge both physical and transitional risks that will impact banks; and the development of needed disclosures to gain the information necessary to measure those risks. ABA will work to ensure that those disclosures do not overreach or inappropriately task banks with the collection of information beyond what is necessary to inform business and risk decisions.

Business Discretion

ABA believes that banks should be able to continue to make their own decisions about who they will do business with, and who they won’t, as long as that engagement is consistent with the law. If policy makers want to regulate fossil fuels or other industries further, they should do so directly through appropriate legislative and regulatory action, not indirectly through banks or other financial intermediaries.

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Environmental, Social, and Governance Working Group

ABA’s Environmental, Social, and Governance (ESG) Working Group will provide member banks with a forum for discussing the many facets of ESG engagement by banks, with a particular focus on advocacy.

Environmental, Social, and Governance Working Group

ABA’s Environmental, Social, and Governance (ESG) Working Group will provide member banks with a forum for discussing the many facets of ESG engagement by banks, with a particular focus on advocacy.