Climate Risk-Management Principles

Issuing the first formal U.S. climate-risk proposal, the OCC is seeking comments on high-level risk-management principles to set the context for additional, more binding action governing larger U.S. banking organizations. Reflecting also FRB efforts likely soon to result in concrete proposals, the OCC emphasizes effective governance and the importance of redesigning current risk-management procedures, monitoring, validation, modelling, and data collection to reflect climate risk. The agency is also open to new instruments or programs that might mitigate climate risk and clearly intends quickly to move from principles to specific scenario-analysis requirements. All of these climate-risk policies and procedures would also need to address not only the direct and indirect risks banks are rapidly addressing, but also the impact of climate risk on vulnerable communities and low-and-moderate income (LMI) households, possibly requiring banks to take an affirmative role restoring environmental justice through their climate-risk management and mitigation programs along with corporate philanthropy and other social-policy operations.