Letter to FHFA on Climate and Natural Disaster Risk Request for Input

The Honorable Mark Calabria
Director
Federal Housing Finance Agency
400 Seventh Street, SW
10th Floor
Washington, DC 20219

Director Calabria,

The American Bankers Association appreciates this opportunity to provide input on the Federal Housing Finance Agency’s Request for Input (RFI) on Climate and Natural Disaster Risk Management at the Regulated Entities (Fannie Mae, Freddie Mac (the GSEs) and the Federal Home Loan Banks (FHLBs)). FHFA’s request is one in a growing array of responses to concerns over climate and natural disaster risk, and we welcome the opportunity to engage on this important topic.

Like many organizations and industries, the American Bankers Association (ABA) has increased our focus on climate related risks. ABA recently joined the U.S. Climate Finance Working Group, a coalition of financial trade associations, in developing a set of principles to guide discussions and engagement on how the financial system and our regulators should address climate change issues. These principles are:

• Set science-based climate policy goals that align with the Paris Agreement
• Increase and strengthen U.S. international engagement
• Provide clear long-term policy signals that foster innovation in financial services
• Price carbon and leverage the power of markets
• Minimize costs and support jobs in the transition
• Foster international harmonization of taxonomies, data standards and metrics
• Promote more robust climate disclosure and international standards
• Ensure climate-related financial regulation is risk-based
• Build capacity on climate risk modeling and scenario analysis
• Strengthen post-disaster recovery, risk mitigation and adaptation

We believe these principles should also guide FHFA as it looks into the issues regarding evaluating and potentially regulating the climate and natural disaster risk posed to the Regulated Entities. Our comments below are consistent with these principles. Nevertheless, just as the RFI notes that FHFA does not have expertise in climate science, neither do the ABA or most of the member banks that provided input into our comments. Therefore, our comments will focus primarily upon the foundational questions posed in the first of the two broad categories detailed in the RFI: “Identifying and Assessing Climate and Natural Disaster Risk,” as well as providing recommendations for sources of expertise and for necessary collaborations in making determinations about the risks faced by the Regulated Entities. We do not believe that either FHFA or the banking industry currently have the expertise to recommend or make changes to enhance the supervisory and regulatory framework of the Regulated Entities with respect to climate-related factors.

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