On March 30, 2022, the Federal Deposit Insurance Corporation (“FDIC”) released a proposed policy statement related to sound management of exposures to climate-related financial risks (the “Proposal”).  The Proposal is targeted at FDIC-supervised financial institutions with more than $100 billion in total consolidated assets (“covered banks”) and is intended to provide a high-level framework for the safe and sound management of climate-related financial risks by covered banks and serve as the basis for more detailed guidance the FDIC expects to issue in the future.

The Proposal includes both a general set of principles for the management of climate-related financial risks and brief descriptions of how those risks can be assessed in various risk categories.  In these substantive respects, the Proposal effectively mirrors a similar proposal issued by the Office of the Comptroller of the Currency in December 2021 on a nearly verbatim basis.  (See Covington’s prior client alert on that OCC proposal here for a discussion of the substance of that proposal, which applies equally to the FDIC’s more recent Proposal.)  However, the preamble discussion that accompanies the Proposal does include several statements not contained in the December 2021 OCC proposal, most notable of which are statements that “the manner in which financial institutions manage climate-related financial risks to address safety and soundness concerns should also seek to reduce or mitigate the impact that management of these risks may have on broader aspects of the economy, including the disproportionate impact of risk on LMI and other disadvantaged communities” and that “[t]hrough this and any subsequent climate-related financial risk guidance, the FDIC will continue to encourage institutions to prudently meet the financial services needs of their communities.”

Like the OCC’s December 2021 proposal, the Proposal both requests public comment in general and poses a range of specific questions for commenters to consider.  These questions largely mirror those posed in the OCC proposal, but also include an additional question asking whether the FDIC or other agencies should “modify existing regulations and guidance, such as those associated with the Community Reinvestment Act, to address the impact climate-related financial risks may have on LMI and other disadvantaged communities.”

Comments are due sixty days after the Proposal is published in the Federal Register, which is likely to occur in the next several weeks.

Photo of Mike Nonaka Mike Nonaka

Michael Nonaka is a partner in the firm’s Financial Institutions practice group. He represents banks and other financial institutions on a wide variety of bank regulatory, enforcement, legislative and policy issues.  Mr. Nonaka also is co-chair of the firm’s Fintech Initiative and works…

Michael Nonaka is a partner in the firm’s Financial Institutions practice group. He represents banks and other financial institutions on a wide variety of bank regulatory, enforcement, legislative and policy issues.  Mr. Nonaka also is co-chair of the firm’s Fintech Initiative and works with a number of banks, lending companies, money transmitters, payments firms, technology companies, and service providers on innovative technologies such as big data, blockchain and related technologies, bitcoin and other virtual currencies, same day payments, and online lending.

Photo of Lindsay Brewer Lindsay Brewer

Lindsay Brewer is an associate in the firm’s Washington office. She advises clients on environmental, product safety, occupational safety, and public policy issues. She has experience with a wide range of environmental and safety programs, with a focus on the Clean Air Act…

Lindsay Brewer is an associate in the firm’s Washington office. She advises clients on environmental, product safety, occupational safety, and public policy issues. She has experience with a wide range of environmental and safety programs, with a focus on the Clean Air Act (CAA), the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA/Superfund), the Federal Trade Commission Act (FTC Act), the Consumer Product Safety Act (CPSA), the Federal Motor Vehicle Safety Standards (FMVSS), and the Occupational Safety and Health Act (OSH Act).