Board of Governors of the Federal Reserve System

I cannot support rescinding the Principles for Climate-Related Financial Risk Management for Large Financial Institutions (principles). Rescinding the principles is short-sighted and will make the financial system riskier even as climate-related financial risks grow.

Since the passage of this guidance in October 2023, climate-related financial risks have increased. In the past year alone, we have witnessed the devastating effects of natural disasters such as Hurricane Helene, the California wildfires, and the Central Texas floods on communities across the country. These types of disasters are projected to continue to increase in frequency and severity, with significant economic and financial consequences that are directly relevant to the Federal Reserve's safety and soundness mandate.

Climate change risks, including severe weather events, can damage property, impede business activity, affect income, and alter the value of assets and liabilities. These risks affect everyone in society--households, communities, businesses, and governments. Further, research has shown a potentially disproportionate impact on the financially vulnerable, including low-and-moderate income and other underserved consumers and communities.

Climate-related financial risks directly affect the financial sector. For example, banks may experience increased credit and market risks associated with loss of income, defaults, and changes in the values of assets; liquidity risks associated with changing demand for liquidity; operational risks associated with disruptions to infrastructure or other channels; or legal risks. Ultimately, weaknesses in how a financial institution identifies, measures, monitors, and controls the risks associated with a changing climate could adversely affect a financial institution's safety and soundness and financial stability.

The principles were designed to help large financial institutions make progress toward incorporating climate-related financial risks into risk management frameworks in a manner consistent with safe and sound practices. Revoking the principles as climate-related financial risks increase defies logic and sound risk management practices.

The rescission contains literally no evidence to support taking this step only two years after putting the principles into effect. We owe the public a rational, evidence-based explanation for our actions, and this rescission fails that test.

I dissent.