```

[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]

                 CLIMATE RISK: ARE FINANCIAL REGULATORS
                        POLITICALLY INDEPENDENT?

=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
                          AND MONETARY POLICY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 18, 2023

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 118-41
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                               __________

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
53-869 PDF                  WASHINGTON : 2024                    
          
-----------------------------------------------------------------------------------   

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

               PATRICK McHENRY, North Carolina, Chairman

FRANK D. LUCAS, Oklahoma             MAXINE WATERS, California, Ranking 
PETE SESSIONS, Texas                     Member
BILL POSEY, Florida                  NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
BILL HUIZENGA, Michigan              GREGORY W. MEEKS, New York
ANN WAGNER, Missouri                 DAVID SCOTT, Georgia
ANDY BARR, Kentucky                  STEPHEN F. LYNCH, Massachusetts
ROGER WILLIAMS, Texas                AL GREEN, Texas
FRENCH HILL, Arkansas, Vice          EMANUEL CLEAVER, Missouri
    Chairman                         JIM A. HIMES, Connecticut
TOM EMMER, Minnesota                 BILL FOSTER, Illinois
BARRY LOUDERMILK, Georgia            JOYCE BEATTY, Ohio
ALEXANDER X. MOONEY, West Virginia   JUAN VARGAS, California
WARREN DAVIDSON, Ohio                JOSH GOTTHEIMER, New Jersey
JOHN ROSE, Tennessee                 VICENTE GONZALEZ, Texas
BRYAN STEIL, Wisconsin               SEAN CASTEN, Illinois
WILLIAM TIMMONS, South Carolina      AYANNA PRESSLEY, Massachusetts
RALPH NORMAN, South Carolina         STEVEN HORSFORD, Nevada
DAN MEUSER, Pennsylvania             RASHIDA TLAIB, Michigan
SCOTT FITZGERALD, Wisconsin          RITCHIE TORRES, New York
ANDREW GARBARINO, New York           SYLVIA GARCIA, Texas
YOUNG KIM, California                NIKEMA WILLIAMS, Georgia
BYRON DONALDS, Florida               WILEY NICKEL, North Carolina
MIKE FLOOD, Nebraska                 BRITTANY PETTERSEN, Colorado
MIKE LAWLER, New York
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee

                     Matt Hoffmann, Staff Director
       Subcommittee on Financial Institutions and Monetary Policy

                     ANDY BARR, Kentucky, Chairman

BILL POSEY, Florida                  BILL FOSTER, Illinois, Ranking 
BLAINE LUETKEMEYER, Missouri             Member
ROGER WILLIAMS, Texas                NYDIA M. VELAZQUEZ, New York
BARRY LOUDERMILK, Georgia, Vice      BRAD SHERMAN, California
    Chairman                         GREGORY W. MEEKS, New York
JOHN ROSE, Tennessee                 DAVID SCOTT, Georgia
WILLIAM TIMMONS, South Carolina      AL GREEN, Texas
RALPH NORMAN, South Carolina         JOYCE BEATTY, Ohio
SCOTT FITZGERALD, Wisconsin          JUAN VARGAS, California
YOUNG KIM, California                SEAN CASTEN, Illinois
BYRON DONALDS, Florida               AYANNA PRESSLEY, Massachusetts
MONICA DE LA CRUZ, Texas
ANDY OGLES, Tennessee
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    July 18, 2023................................................     1
Appendix:
    July 18, 2023................................................    39

                               WITNESSES
                         Tuesday, July 18, 2023

Benatar, Hon. Sarah, Treasurer, Coconino County, Arizona.........     9
Coleman, Greg, Senior Deputy Comptroller for Large Bank 
  Supervision, Office of the Comptroller of the Currency (OCC)...     4
Eberley, Doreen R., Director, Division of Risk Management 
  Supervision, Federal Deposit Insurance Corporation (FDIC)......     6
Gibson, Michael S., Director, Supervision and Regulation, Board 
  of Governors of the Federal Reserve System (Fed)...............     6
Jones, Rendell L., Deputy Executive Director, National Credit 
  Union Administration (NCUA)....................................     8

                                APPENDIX

Prepared statements:
    Benatar, Hon. Sarah..........................................    40
    Coleman, Greg................................................    43
    Eberley, Doreen R............................................    50
    Gibson, Michael S............................................    59
    Jones, Rendell L.............................................    65

              Additional Material Submitted for the Record

Barr, Hon. Andy:
    Written statement of the Independent Community Bankers of 
      America (ICBA).............................................    70
Waters, Hon. Maxine:
    Letter from Americans for Financial Reform...................    72
    Better Markets Fact Sheet: Politics Aside, Banking 
      Regulators' Risk Analysis Must Include the Many Well-Known 
      Climate-Related Financial Risks, dated July 17, 2023.......    75
    Pleiades Strategy report, ``Right-Wing Attacks on the Freedom 
      to Invest Responsibly Falter in Legislatures,'' by Connor 
      Gibson and Frances Sawyer..................................    80
    Written statement of the State of Washington Department of 
      Financial Institutions.....................................   126
Benatar, Hon. Sarah:
    Written responses to questions for the record from 
      Representative Waters......................................   129
Eberley, Doreen R.:
    Written responses to questions for the record from 
      Representative Barr........................................   131
    Written responses to questions for the record from 
      Representative Waters......................................   140
Gibson, Michael S.:
    Written responses to questions for the record from 
      Representative Barr........................................   142
    Written responses to questions for the record from 
      Representative Fitzgerald..................................   152
    Written responses to questions for the record from 
      Representative Waters......................................   154
Jones, Rendell L.:
    Written responses to questions for the record from 
      Representative Barr........................................   155
    Written responses to questions for the record from 
      Representative Fitzgerald..................................   158
    Written responses to questions for the record from 
      Representative Waters......................................   155

 
                      CLIMATE RISK: ARE FINANCIAL
                  REGULATORS POLITICALLY INDEPENDENT?

                              ----------                              

                         Tuesday, July 18, 2023

              U.S. House of Representatives
             Subcommittee on Financial Institutions
                               and Monetary Policy,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:08 a.m., in 
room 2220, Rayburn House Office Building, Hon. Andy Barr 
[chairman of the subcommittee] presiding.
    Members present: Representatives Barr, Posey, Luetkemeyer, 
Williams of Texas, Loudermilk, Rose, Timmons, Norman, 
Fitzgerald, Kim, De La Cruz, Ogles; Foster, Sherman, Green, 
Beatty, Vargas, Casten, and Pressley.
    Ex officio present: Representative Waters.
    Also present: Representative Huizenga.
    Chairman Barr. The Subcommittee on Financial Institutions 
and Monetary Policy will come to order.
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time.
    Today's hearing is entitled, ``Climate Risk: Are Financial 
Regulators Politically Independent?''
    I now recognize myself for 4 minutes to give an opening 
statement.
    The Federal regulators represented here today have recently 
coordinated to promulgate principles for managing climate-
related financial risks. The guidance and information requested 
by the regulators aligns with a 2021 Executive Order, efforts 
promoted by the Financial Stability Oversight Council (FSOC), 
and recommendations from various international global 
governance organizations. The Federal Reserve is extending 
furthest with a mandatory supervisory climate scenario analysis 
and formal collaboration with Treasury's Office of Financial 
Research on Climate Data and Analysis, which the Board of 
Governors never voted to approve. FSOC Chair Yellen has 
repeatedly identified climate change as an existential crisis 
and has called climate change, ``an emerging and increasing 
threat to financial stability.''
    Following the Administration's posture on climate-related 
financial risk, regulators have begun inserting climate 
policies into bank regulation and supervision. There is little 
transparency about regulators' climate efforts and what occurs 
in Administration-led climate working groups or international 
global governance organizations. Four bills have been attached 
to this hearing to address this lack of transparency and 
regulatory capture. There is also a lack of transparency about 
funding of some of the climate-related efforts of the 
international organizations, including the tangled web of 
financing associated with the Network for Greening of the 
Financial System (NGFS). There is nothing wrong with regulators 
wanting to learn more about data methods and analysis or asking 
questions of banks about what they are doing. No one believes 
that financial institutions should ignore not-fully-understood 
risks. But we and the regulators know that institutions are 
already analyzing climate-related financial risks, and many 
large institutions have public-facing information available 
describing how they are monitoring and managing this risk. Yet 
somehow, after an Executive Order was issued and FSOC made 
pronouncements, the regulators found a sudden need for a 
coordinated public-facing campaign of guiding principles for 
climate risks that research says are manageable.
    Regulators are saying that their efforts are intended to 
help banks manage risks that are not yet fully understood even 
by the regulators, with the underlying premise that somehow the 
prudential regulators know better than the private sector. That 
seems odd, given that the Fed says that they must exercise 
humility about spotting risks, and they couldn't even help 
institutions manage interest rate risks. The Fed's Vice Chair 
for Supervision promises, as he did with Silicon Valley Bank's 
failure, to write a public-facing report of his personal 
assessment of what his climate scenario analysis reveals, using 
data that Congress will not be able to see to corroborate his 
findings.
    At best, existing climate-related financial risk analysis 
can show long-run directionality of financial and economic 
effects of alarming climate futures. But to think that existing 
analyses can accurately predict near-term effects of projected 
climate changes 5, 10, or even 100 years out is misleading and 
false advertising. Climate models are typically unwieldy 
mongrels characterized by cascading uncertainties as they mix 
and match inputs and outputs from economic, climate, ocean, 
temperature, and other modules to produce questionable numbers 
with highly-questionable predictive content.
    There are so many degrees of freedom available to climate 
analysts that, like cooking soup with a cabinet full of spices, 
you can get whatever flavor of results that you would like. As 
Nobel Prize-winning economist, Lars Peter Hansen, counsels to 
regulators and central banks, ``Their credibility will be 
further enhanced by avoiding the temptation to exaggerate our 
understanding of climate change.'' On climate policy driven by 
Biden Administration directives, regulators are choosing 
politicized policymaking, putting their independence at risk 
and giving in to the temptation to exaggerate our understanding 
of climate change.
    The Chair now recognizes the ranking member of the 
subcommittee, the gentleman from Illinois, Mr. Foster, for 4 
minutes for an opening statement.
    Mr. Foster. Thank you, Chairman Barr, thank you to our 
witnesses for being here today, and thank you to our regulators 
for appropriately and thoughtfully responding to the changing 
risk profiles of our financial systems. As our world changes, 
it is important that participants in our financial system 
remain well-apprised of new and emerging risks, and it is 
important that our regulators help them stay well-postured for 
those risks. History tells us that systemic financial risks do 
not come from politically-driven overreaction to emerging risk, 
but rather from regulatory capture, properly defined, which is 
the use of the political power by economic incumbents, who use 
their political power to restrict the ability of regulators to 
respond to new and real financial threats that powerful 
incumbents may find inconvenient to acknowledge.
    We saw that most recently in the financial collapse of 
2007, which was preceded by more than 20 years of the Great 
Moderation, a period lasting from about 1984 to 2008, a period 
of low volatility and continuously-rising asset prices, 
including home prices that rose faster than GDP, but also a 
banking system and a middle class that became leveraged beyond 
all reason, and an economy completely dependent on 
continuously-rising asset and real estate prices, which was 
obviously unsustainable from first principles, just as it is 
scientifically unsustainable to continue putting greenhouse 
gases into our atmosphere without suffering severe economic 
consequences.
    However, in 2007, as well as many times in our history, the 
political power of economic incumbents encouraged or forced 
regulators to keep their heads in the sand. So instead of 
appropriately responding to what was then euphemistically 
called the subprime crisis, at the tip of a much larger iceberg 
of systemic risk, in 2008 the Bush Treasury Department put out 
the Blueprint for a Modernized Financial Regulatory Structure, 
which, incredibly, proposed even further deregulation of an 
already-shaky financial system.
    The threat of political influence on our financial 
regulators is real, and climate change does pose systemic risk 
to our nation's financial system. The destruction waged by 
stronger hurricanes and tornadoes, more-intense floods and 
droughts, sea-level rise, and wildfires threatens businesses, 
banks, and credit unions across our country. And when a large 
swath of a region's businesses or homeowners face major losses 
all at once from one of these catastrophic weather systems, 
financial institutions that issue loans or insurance to them, 
in turn, must swallow large losses. And to maintain system-wide 
stability, the regulators must ensure that banks are able to 
weather these literal and figurative storms.
    Similarly, on the investment level, in order to effectively 
manage their own risk, shareholders must have access to 
information regarding a company's exposure to climate-related 
risks. We cannot allow Americans to lose their retirement 
savings because acknowledging the realities of climate change 
has been overshadowed by partisan politics. The Federal 
financial regulators, including the SEC, have recently 
promulgated regulations to address system-wide and investor-
level risks, and I applaud them for doing so.
    My Republican colleagues seem to have called this hearing 
to promote the idea that regulations represent a lack of 
political independence by the agencies, and that they are 
responding to Democratic pressure to raise the alarm about the 
impacts of climate change. However, the true danger lies in the 
other direction, in a politically-driven underreaction, and 
these rules simply recognize the reality of climate risk to our 
financial system.
    If hearings like this one end up pressuring regulators to 
bury their heads in the sand and ignore climate risks, it would 
create a grave economic distortion and risk unnecessary failure 
of our financial institutions and the harm to ordinary 
Americans that inevitably follows. So, I applaud FSOC and the 
SEC for following the science and considering the financial 
risk posed by climate change in spite of the political 
pressure. And I look forward to hearing from our witnesses 
today how we can further increase transparency and mitigation 
surrounding financial institutions' climate risk.
    Chairman Barr. The gentleman's time has expired. The Chair 
now recognizes the gentleman from Michigan, Mr. Huizenga, who 
is also the Chair of our Subcommittee on Oversight and 
Investigations, and the leader of the Environmental, Social, 
and Governance Working Group, for 1 minute.
    Mr. Huizenga. Thank you, Chairman Barr. I appreciate you 
allowing me to participate in this hearing. Well-intentioned 
but misguided government mandates are nothing new in 
Washington. However, the radical shift by this Administration 
to pound environmental, social, and governance (ESG) policies 
into every facet of our society outside of the legislative 
process has reached a critical breaking point. As banking 
regulators continue to push for the disclosure of climate-
related information which they have little or no experience 
with, small businesses, as well as low- and middle-income 
families across the country continue to be crushed by soaring 
costs stemming from President Biden's failed economic agenda. 
Instead of feeding their obsession to become climate 
policymakers, often picking winners and losers, regulators 
should focus on sound banking policy that won't impede 
America's drive for energy independence and increased economic 
opportunity for all. Republicans won't idly stand by and allow 
banking regulators on their own to channel credit to 
politically-desirable sectors, bypassing Congress.
    So thank you, Mr. Chairman, for allowing me to join your 
subcommittee, and I look forward to hearing from the witnesses.
    Chairman Barr. The gentleman yields back. The gentlelady 
from California is not here, so we will move on to witness 
testimony.
    Today, we welcome the testimony of Mr. Greg Coleman, the 
Senior Deputy Comptroller for Large Bank Supervision at the 
Office of the Comptroller of the Currency; Ms. Doreen Eberley, 
the Director of the Division of Risk Management Supervision at 
the Federal Deposit Insurance Corporation; Dr. Michael S. 
Gibson, the Director of Supervision and Regulation at the Board 
of Governors of the Federal Reserve System; Mr. Rendell L. 
Jones, the Deputy Executive Director of the National Credit 
Union Administration; and the Honorable Sarah Benatar, the 
Treasurer of Coconino County, Arizona--welcome to Washington. 
Thank you all for being here.
    Each of you will be recognized for 5 minutes to give an 
oral presentation of your testimony, and without objection, 
each of your written statements will be made a part of the 
record.
    Mr. Coleman, you are now recognized for 5 minutes to give 
your oral remarks.

STATEMENT OF GREG COLEMAN, SENIOR DEPUTY COMPTROLLER FOR LARGE 
  BANK SUPERVISION, OFFICE OF THE COMPTROLLER OF THE CURRENCY 
                             (OCC)

    Mr. Coleman. Chairman Barr, Ranking Member Foster, and 
members of the subcommittee, thank you for the opportunity to 
appear today to discuss the Office of the Comptroller of the 
Currency's (OCC's) activities around climate-related financial 
risk. The OCC is an independent bureau of the Department of the 
Treasury, and its mission is to ensure that national banks and 
Federal savings associations operate in a safe and sound 
manner, provide fair access to financial services, treat 
customers fairly, and comply with applicable laws and 
regulations.
    Consistent with that mission, one of the OCC's current 
priorities is acting on climate risk due to the increased 
frequency, severity, and volatility of weather events which 
affect the value of financial assets, borrowers' 
creditworthiness, and the associated risk banks may take onto 
their balance sheets. Our focus for this priority is on the 
largest banks. I would like to stress that the OCC does not and 
will not tell bankers what customers or legal businesses they 
may or may not bank. Rather, we are committed to staying 
focused on banks' risk management of climate-related financial 
risks. This focus is firmly rooted in our mandate to ensure 
that national banks and Federal savings associations operate in 
a safe and sound manner.
    The OCC has approached climate-related financial risk the 
same way the agency approaches any emerging risk area: by 
working with our regulated institutions to determine if they 
have appropriate processes and procedures in place to address 
the risk. In December 2021, the OCC issued for public comment 
draft principles designed to support the identification and 
management of climate-related financial risks at OCC-regulated 
institutions with more than $100 billion in total assets. 
Limiting the scope of the guidance to large banks, which have 
already begun to monitor this emerging risk, is intentional 
because their exposure to climate-related financial risk may be 
material.
    The draft principles describe general considerations 
relating to bank governance policies, procedures, and limits, 
strategic planning, risk management, data, and other areas. 
They provide considerations for how climate-related financial 
risk can be addressed in the traditional risk categories, 
including credit, liquidity, operational risk, and others. The 
agency has invited feedback on all aspects of the draft 
principles, and we are continuing to work and continuing to 
consider the comments received. We are working with our 
interagency colleagues to determine the next steps in this 
area.
    On their own initiative, large banks have begun 
incorporating climate-related financial risks in their risk 
management frameworks and policies. To understand their 
climate-related financial risk management programs, the OCC 
began reviewing this information in 2022. My testimony 
describes our initial observations from these reviews. In 
general, the large banks we supervise are in varying stages of 
developing processes to measure and monitor their potential 
exposures to physical and transition climate-related financial 
risks.
    I stress that community banks are not the focus of our 
climate-related financial risk efforts. Based on decades of 
experience in their local communities, community bankers are 
very familiar with the impacts of weather events upon their 
customers and businesses. Further, these banks have long 
managed the risks that localized weather events present. The 
OCC does not intend our efforts aimed at the large banks to 
trickle down to community banks. However, Acting Comptroller 
Hsu has suggested that mid-sized and community bankers be 
mindful of these risks and give thought to how they can 
continue to manage them appropriately.
    To ensure that the OCC is aware of the climate-related 
financial risk management efforts of other Federal Government 
and international bodies, the agency is a member of the 
Financial Stability Oversight Council's Climate-related 
Financial Risk Committee. We also participate in the Basel 
Committee on Banking Supervision Task Force on Climate-Related 
Financial Risks, and the Network of central banks and 
supervisors in the Network for Greening the Financial System. 
Our efforts with these international bodies allow the OCC to 
ensure awareness of and facilitate information sharing with our 
fellow regulators.
    In closing, the OCC is committed to assessing climate-
related financial risks at banks with over $100 billion in 
consolidated assets from a risk management perspective. This 
approach is consistent with how the agency responds to emerging 
risks to the banking industry and to ensure that national banks 
and Federal savings associations continue to remain safe and 
sound, provide fair access to credit, and treat customers 
fairly.
    Thank you, and I will be happy to answer your questions.
    [The prepared statement of Senior Deputy Comptroller 
Coleman can be found on page 43 of the appendix.]
    Chairman Barr. Thank you for your testimony, Mr. Coleman.
    Ms. Eberley, you are now recognized for 5 minutes to give 
your oral remarks.

  STATEMENT OF DOREEN R. EBERLEY, DIRECTOR, DIVISION OF RISK 
 MANAGEMENT SUPERVISION, FEDERAL DEPOSIT INSURANCE CORPORATION 
                             (FDIC)

    Ms. Eberley. Thank you. Chairman Barr, Ranking Member 
Foster [Audio malfunction in the hearing room.] and Members of 
Congress--apologies--on the issues outlined in my testimony. I 
look forward to answering your questions.

    [Due to audio difficulties in the hearing room, Director 
Eberley's oral testimony is missing. Please see her written 
statement as indicated below.]

    [The prepared statement of Director Eberley can be found on 
page 50 of the appendix.]
    Chairman Barr. The gentlelady yields back.
    The Chair now recognizes Dr. Gibson for his oral remarks.

   STATEMENT OF MICHAEL S. GIBSON, DIRECTOR, SUPERVISION AND 
 REGULATION, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 
                             (FED)

    Mr. Gibson. Chairman Barr, Ranking Member Foster, and 
members of the subcommittee, thank you for the opportunity to 
discuss the Federal Reserve's supervisory work related to the 
financial risks of climate change.
    The Federal Reserve's responsibilities with respect to 
climate change are important but narrow. These responsibilities 
are tightly linked to our responsibilities for bank supervision 
and financial stability. Because climate change could pose 
challenges for the financial system, it is important that we 
better understand these risks. Our primary focus is to evaluate 
whether banks operate in a safe and sound manner and manage all 
material risks, including climate-related financial risks.
    Before proceeding, it is important to emphasize two general 
points about our supervisory approach. First, the Federal 
Reserve recognizes that decisions about policies to address 
climate change itself should be made by the elected branches of 
government. As Chair Powell stated earlier this year, the 
Federal Reserve is not a climate policymaker.
    Second, it is not the Federal Reserve's policy to 
discourage banks from offering accounts or services to any 
class or type of law-abiding business, and this is not a part 
of our work in looking into climate-related financial risk.
    Our supervisory work related to the financial risks from 
climate change is based on our core responsibility to ensure 
that banks understand and appropriately manage all material 
risks, including any related to climate change. Weaknesses in 
how banks identify, measure, monitor, and control climate-
related financial risks could adversely affect a bank's safety 
and soundness. To fulfill this supervisory responsibility, the 
Federal Reserve is working to better understand the potential 
implications of climate change for supervised banks.
    I will now briefly discuss two near-term supervisory 
priorities for the Federal Reserve related to the financial 
risks of climate change: issuing interagency guidance for large 
banks; and conducting a pilot climate scenario analysis 
exercise.
    Last December, the Federal Reserve asked for public comment 
on draft guidance providing a high-level framework for the safe 
and sound management of exposure to climate-related financial 
risks for large banks. The guidance would apply only to banks 
with over $100 billion in total consolidated assets. The 
proposed guidance contains high-level principles and describes 
how climate-related financial risks can be addressed in 
specific prudential risk areas. We intend to coordinate with 
the OCC and the FDIC in issuing any final guidance to promote 
consistency across the supervision of large financial 
institutions.
    Climate scenario analysis, in which the resilience of 
financial institutions is reviewed under different climate 
scenarios, is an emerging risk management and supervisory tool 
used to evaluate climate-related financial risks. The pilot 
climate scenario analysis launched in January was designed with 
two objectives: to learn about large banking organizations' 
climate risk management practices and challenges; and to 
enhance the ability of both large banking organizations and 
supervisors to identify, measure, monitor, and manage climate-
related financial risks.
    I should emphasize that we view climate scenario analyses 
as distinct and separate from the Federal Reserve's supervisory 
stress test. The Federal Reserve's stress test is designed to 
assess whether large banking organizations have enough capital 
to continue lending to households and businesses during a 
severe recession and financial market shock. The pilot climate 
scenario analysis exercise, on the other hand, is exploratory 
in nature and does not have consequences for bank capital or 
supervisory implications.
    As I mentioned earlier, the Federal Reserve's role with 
respect to climate change is important but narrow. The Federal 
Reserve has a duty to understand risks to the safety and 
soundness of the banks it oversees and to the financial system, 
including the financial risks from climate change. Thank you. I 
look forward to your questions.
    [The prepared statement of Director Gibson can be found on 
page 59 of the appendix.]
    Chairman Barr. Thank you.
    Mr. Jones, you are now recognized for 5 minutes.

   STATEMENT OF RENDELL L. JONES, DEPUTY EXECUTIVE DIRECTOR, 
          NATIONAL CREDIT UNION ADMINISTRATION (NCUA)

    Mr. Jones. Good morning, Chairman Barr, Ranking Member 
Foster, and members of the subcommittee. Thank you for inviting 
the National Credit Union Administration (NCUA) to discuss the 
agency's activities regarding climate-related financial risk. 
My name is Rendell Jones, and I am the deputy executive 
director for NCUA. As a regulator and insurer, the NCUA is 
responsible for examining and supervising for credit union 
resilience against all material risks. The agency believes that 
credit unions are best-positioned to assess various risks, 
including climate-related financial risks and opportunities 
within their specific fields of membership.
    In my testimony, I will summarize a recent voluntary 
request for information. In late April, at a public meeting of 
the NCUA board, the NCUA issued a Request for Information (RFI) 
seeking input from stakeholders and subject matter experts to 
strengthen the agency's ability to identify and understand 
credit unions' current and future climate-related financial 
risks. The NCUA's goal in issuing the RFI is twofold: first, 
the agency seeks to improve its understanding of climate-
related financial risks, how credit unions view them, and how 
it can best support the industry in mitigating them; and 
second, the agency aims to better understand the products and 
services credit unions can offer to leverage opportunities 
presented by any related transitions and key economic sectors.
    In the NCUA's RFI, the agency requested voluntary feedback 
and included 38 questions for the public's consideration. It 
solicited input on a variety of topics, including climate-
related physical and transition risks that are affecting or may 
affect the industry in the future, potential adjustments to 
operations, governance, and business strategies to mitigate 
those risks and methods, metrics and tools for identifying and 
measuring those risks, and climate-related business 
opportunities, including the support needed to expand products 
and services, and any barriers that credit unions might face. 
The comment period closed on June 26th, and the agency received 
44 responses from individual credit unions, credit union trade 
associations, and other interested parties. Insights derived 
from the responses provided by stakeholders will be essential 
in shaping any future efforts in this area.
    As noted in the RFI, NCUA does not plan to use the 
information collected in the examination and supervision of 
individual credit unions. Any new requirements for credit 
unions associated with climate-related financial risks would 
require changes to existing examination and supervision 
procedures and approval by the NCUA board. The credit union 
system remains well-capitalized, stable, and well-positioned to 
handle various economic possibilities. The NCUA continues to 
monitor for any material risks, including climate-related 
financial risks, to credit union performance and the health and 
stability of the National Credit Union Share Insurance Fund.
    Thank you for the invitation to testify before you today, 
and I look forward to answering any questions you may have.
    [The prepared statement of Mr. Jones can be found on page 
65 of the appendix.]
    Chairman Barr. Thank you.
    Ms. Benatar, you are now recognized for 5 minutes.

 STATEMENT OF THE HONORABLE SARAH BENATAR, TREASURER, COCONINO 
                        COUNTY, ARIZONA

    Ms. Benatar. Thank you, Mr. Chairman, Mr. Ranking Member, 
and distinguished members of the House Financial Services 
Committee. My name is Sarah Benatar, and I serve as the 
Treasurer of Coconino County in Arizona, the second-largest 
county by area in the country. In addition to this, I am 
president of both the Arizona Association of Counties and the 
National Association of Hispanic County Officials. As 
Treasurer, I serve as the bank and chief investment officer for 
the entire county, responsible for the safekeeping of public 
dollars on deposit with us from county departments to all 
special districts, such as schools and fire districts.
    My fellow county government officials across the country 
spend days and nights worrying about potential risks that would 
cost taxpayers money and could jeopardize our ability to pay 
for the hardworking first responders, road crews, and other 
public servants in our communities. In managing public funds, 
it is important to always put the safety of public dollars 
first, followed by addressing liquidity needs, and finally, 
working towards a positive rate of return. In short, safety 
first, then liquidity, and then, yield. This necessarily 
includes considering all forms of risk, including climate 
risks. These priorities ensure that we are the best stewards of 
public funds.
    Unfortunately, we are seeing a national trend that 
jeopardizes our top priority to ensure the safety of taxpayer 
dollars. Across the country, legislation is being introduced 
that will reduce the universe of banks with whom our Treasury 
can do business, what we can invest in, and what policies we 
can adopt to evaluate risks associated with public fund 
management. Many of these proposals claim to want to de-
politicize financial regulations, but instead embed new 
political tests that protect special interests from market 
competition.
    Furthermore, when the rubber meets the road in implementing 
these bills, they raise costs to our taxpayers. Every 
jurisdiction needs a servicing bank. The free-market request 
for proposal (RFP) process is vital to ensuring the protection 
of taxpayer dollars, but it only works if there are sufficient 
bidders for a free market to exist. Responses to government 
RFPs are already limited due to collateralization and asset 
requirements, with only a handful of banks even servicing 
governments. Simply put, an anti-ESG legislation will push 
numerous bidders out of the process entirely. At best, local 
governments will be left with one option to select from and 
would suffer from higher costs. At worst, we would receive no 
bids, leaving us without a servicing bank, and changing local 
government as we know it.
    How will I pay my firefighters who are on multiweek 
assignments if I can't do direct deposit because we don't have 
a bank? This reduction in size of the market for public banking 
services is a reality, not a hypothetical, for local 
governments and States where anti-ESG legislation has passed.
    In addition to servicing bank needs, treasurers are 
responsible for the investment of public funds. The foremost 
objectivity in government investing is the safety of principal, 
which means mitigating and evaluating risks of investment 
decisions in both the short term and long term. As a prudent 
fiduciary, I believe that climate risks are part of that 
analysis of safety that must be considered to honor my duty of 
care and duty of loyalty. Over the last year alone, my county 
has faced numerous wildland fires, flooding events, tornadoes, 
record snowfalls, and now, record heat levels. When determining 
whether to invest in a corporate bond, I should have the 
ability to evaluate the risk of an investment by asking 
questions like, is a major distribution center of this company 
in a disaster area?
    Safety of public funds is about evaluating risks with all 
the tools in our toolbox. It is up to us as prudent local 
investment officers to decide which tools we want to use. These 
concerns are shared by local officials across the country, 
regardless of party. We want what is best for our communities, 
and we want to keep taxpayer money safe. We want free markets 
so that we can get the best value. We want the ability to make 
choices ourselves as to whom we do business with, and how we 
invest our public dollars. There is no better illustration of 
this than the bipartisanship between the county treasurers in 
Arizona who have stood together to oppose legislation that will 
jeopardize our ability to be good stewards of public dollars.
    I urge you to listen to the dedicated public servants who 
are elected by communities within your districts, to the 
associations of businesses who have spoken out against these 
measures, and to the average citizens who just want their 
taxpayer dollars protected. Thank you for your consideration.
    [The prepared statement of Ms. Benatar can be found on page 
40 of the appendix.]
    Chairman Barr. Thank you, and we will now turn to Member 
questions. The Chair now recognizes himself for 5 minutes for 
questioning.
    Mr. Gibson, your testimony, you quoted Chair Powell as 
saying that, ``The Federal Reserve is not a climate 
policymaker.'' You also said that it is not and never has been 
the Federal Reserve's policy to discourage banks from offering 
accounts or services to any class or type of law-abiding 
business, and that was not part of your work.
    Mr. Coleman, in your testimony, you said that the OCC does 
not and will not tell bankers what customers or legal 
businesses they may or may not bank.
    And Ms. Eberley, in your testimony, you pointed out that 
the FDIC will not be involved in determining with which firms 
or sectors financial institutions should do business. These 
types of credit allocation decisions are the responsibility of 
financial institutions.
    What this hearing is going to be about, though, is why 
Members of Congress, and market participants, and banks, and 
their customers are skeptical of these assurances, because, Mr. 
Gibson, when you say this climate scenario analysis exercise 
that the Fed is undertaking will not have consequences for bank 
capital or supervisory implications, what we say is, not yet--
at least, not yet.
    We want to know where this is going, so to that end, we 
want to talk to Dr. Gibson first about what the Fed is doing as 
part of the NGFS--let me just start with Mr. Coleman, actually.
    Mr. Coleman, can you tell me about what the OCC knows about 
funding at the Network for Greening the Financial System, 
including who funds work on climate analysis? And in your 
answer, can you specifically address this group called the 
International Network for Sustainable Financial Policy 
Insights, Research, and Exchange (INSPIRE?)
    Mr. Coleman. Thank you for the question. I am not aware of 
the funding structure for these organizations. The OCC 
participates in these organizations, along with several other 
international and domestic regulatory bodies, in order for us 
to share information and learn from them on a variety of 
emerging risk issues.
    Chairman Barr. And Dr. Gibson, can you answer the same 
question about what the Fed knows about NGFS funding, and about 
the involvement of INSPIRE or the pass-through funding 
organization, the ClimateWorks Foundation?
    Mr. Gibson. Yes. I also don't know anything about the 
funding of the NGFS. We do participate in their meetings and in 
their working groups.
    Chairman Barr. If there is involvement of ClimateWorks in 
funding NGFS, climate models, data scenario analysis, and the 
like, would the Fed have concerns about politics creeping into 
ClimateWorks, given that the current senior adviser to 
President Biden for clean energy innovation and implementation 
had for years been an influential member of the board of 
ClimateWorks, which, at least in 2021, held more than $430 
million in assets to distribute for environmental activist 
grantmaking?
    Mr. Gibson. We participate in these international groups in 
order to learn from our foreign counterparts and participate in 
the discussions around international standards, but that is the 
extent of it.
    Chairman Barr. To Mr. Coleman, Ms. Eberley, and Dr. Gibson, 
how many meetings have there been between officials and 
employees of your agencies and the NGFS since January of 2021?
    Mr. Coleman. I do not have an answer to the specific number 
of meetings.
    Ms. Eberley. I don't know the number either.
    Mr. Gibson. I don't know this exact number. We do 
participate in their meetings.
    Chairman Barr. How many people are you dedicating to 
traveling to these meetings with NGFS?
    Mr. Coleman. I don't think we have anyone dedicated just to 
the NGFS, and most of the meetings are virtual.
    Chairman Barr. Can any of you describe, besides just 
discussing and listening, what other work you are doing with 
this international body, NGFS, and where can we find an 
accounting of that work?
    Mr. Coleman. The NGFS publishes on their website their work 
plan and all their work products, so I think everyone has 
access to the work that they are doing.
    Chairman Barr. Are there NGFS workstream papers or models? 
In my remaining time, let me just get to the point. Members of 
Congress and the American people are very concerned about the 
extraterritorial reach of--I mean, you all can't even answer 
these questions--this opaque, mysterious international body 
that apparently is influencing the agencies that are regulating 
our banks. So not only is there an opacity with what with what 
is going on here, we have this international body that is 
potentially impacting decision-making. And what we are worried 
about is where this is going, to have an international body 
influencing regulators to pressure financial institutions, 
maybe not now, but eventually, to force them into credit 
allocation decisions that are entirely inappropriate.
    With that, my time has expired, and I will recognize the 
ranking member of the full Financial Services Committee, Ms. 
Waters from California, for 5 minutes.
    Ms. Waters. Thank you very much. Treasurer Benatar, while 
House Republicans are focusing on Federal regulators of banks 
and credit unions, Democrats thought it was important to have 
additional local government perspectives on what anti-ESG 
attacks mean to the banking relationships. I understand that 
earlier this year, you led a letter, signed by Democrat and 
Republican county treasurers in your State, opposing anti-ESG 
legislation that would have limited the ability of certain 
banks and others to do business in the State of Arizona. What 
would the impacts of this legislation be on your accounting and 
on your work as a county treasurer? Have you heard similar 
concerns from other local or State treasurers in other parts of 
the county?
    Ms. Benatar. We have heard from other States that have 
passed these anti-ESG legislations, that it has increased 
costs, and it has also reduced the number of companies with 
whom you can do business. My role as president of the National 
Association of Hispanic County Officials has allowed me to 
connect with my colleagues across the country, and studies also 
have come out that are saying the same exact thing.
    For example, if you look at Texas, it is going to result in 
billions of dollars, and right now they are paying an 
additional $300 million to $500 million just to do bonds in in 
their State. If you look at Florida, Florida has a higher 
rating than California, yet they are paying higher interest 
rates due to anti-ESG legislations that are passing. So, that 
was a concern of ours in Arizona because we are very limited in 
who we can do business with right now, and reducing the number 
of financial institutions that we can work with will have dire 
consequences within our communities and will cost our taxpayers 
money.
    Ms. Waters. Can you give us some insight on what has been 
alluded to here today about pressure that has been placed on 
banks and our financial institutions from these foreign 
entities worldwide, et cetera? What do you know about that?
    Ms. Benatar. I have a fiduciary duty, and I have a duty of 
loyalty to the residents of my county. And for me, the most 
important thing is the public safety of our dollars, not just 
for today, but for generations to come. I have to look at best 
practices, and that includes things like climate risk analysis, 
in my decision-making. That includes looking at regulations. 
That includes being able to find the information, so I am 
analyzing the risks to the best of my ability, and this is also 
noted by nonpartisan organizations for government financial 
managers across the country.
    I need to be able to easily access that information, 
including climate risks, when I am evaluating my investment 
decisions, but also my cash flow analysis. So, although I may 
not necessarily know the information about the national groups, 
I do know that there are best practices out there that I do 
need to follow in the work that I do.
    Ms. Waters. You have alluded to your fiduciary 
responsibility, and in alluding to that, what you are saying is 
you must take into consideration all of the possible risks, et 
cetera, as you make decisions. Do you have any further comments 
about fiduciary responsibility, because that is very, very key 
when we are dealing with our financial institutions, our banks, 
et cetera.
    Ms. Benatar. Thank you. No, that is the number-one priority 
of mine, and it is the number-one priority of government 
officials across the country. And for us in local government, 
safety will always come first, then liquidity, then yield, and 
for me, climate analysis and climate risk is real.
    In my community, we have been facing fires and flooding for 
well over 10 years. Without using and including climate 
analysis in my day-to-day work, I would not have the cash flow 
available to be able to free up the money, not just from my 
fire district for our fire, but for the 20-, 30-, and 40-year 
flooding events we will now be having. And that also means my 
investment portfolio management, I need to make sure I am 
considering that as well. So for me, safety will always come 
first because taxpayer money is at stake.
    Ms. Waters. I thank you for the very profound information. 
As you know, I am from California, and we have had fires that 
are unprecedented in the State of California. So, I hope that 
you Arizona, California, and other States that are experiencing 
these kinds of devastating natural causes will have the kind of 
information that you need to help people understand exactly 
what is going on with climate risk.
    Chairman Barr. The gentlelady's time has expired. The 
gentleman from Florida, Mr. Posey, is now recognized.
    Mr. Posey. Thank you very much, Mr. Chairman, and I thank 
all the witnesses for your testimony and for taking the time to 
appear before us this morning.
    At the Financial Stability Oversight Council hearing before 
the Senate Banking Committee just about a year ago, Senator 
Toomey asked Secretary Yellen if there had been a single 
failure of a financial institution as a result of a severe 
weather event. She acknowledged that she wasn't aware of such a 
failure. Can any of you identify an example where a flood, 
hurricane, or wildfire has resulted in a financial 
institution's failure? I guess I will ask each of you to 
answer. I will start with Ms. Benatar.
    Ms. Benatar. I will personally say that in terms of 
financial institutions, I do not have any knowledge, but I do 
want to point out that for----
    Mr. Posey. You have answered my question. Thank you.
    Mr. Jones?
    Mr. Jones. Yes. There were two credit unions that failed as 
a result of the impact of Hurricane Katrina, one causing a loss 
to the Share Insurance Fund of about $500,000.
    Mr. Posey. Okay. Mr. Gibson?
    Mr. Gibson. I am not aware of any bank failures that can be 
attributed directly to climate change.
    Mr. Posey. Ms. Eberley?
    Ms. Eberley. The same answer. No failures attributed to 
climate change or weather events.
    Mr. Coleman. The same answer. I am not familiar with any 
bank failures related to weather events.
    Mr. Posey. Experts tell us there are two kinds of climate-
related risk: natural risks that I just asked you each about; 
and the risk to financial positions for transitioning away from 
things like fossil fuels to other energy sources. Can you 
please give a clear, concise example of a credible material and 
imminent financial risk of climate change that warrants the 
government opposing a climate risk management discipline on 
financial institutions at the expense of climate scenario 
analysis at this time? And I will start with you, Mr. Coleman.
    Mr. Coleman. Thank you for the question. I would start with 
a physical risk. For example, you could have an institution 
that relies upon the collateral value of some type of property. 
That property that was impacted by a climate-related financial 
risk could impact the value of that collateral. That could also 
impact the ability for that property to cash flow, which could 
then impact the value of that asset to the institution.
    Mr. Posey. Thank you. Ms. Eberley?
    Ms. Eberley. Institutions have relied on insurance to 
mitigate the risks of weather events, and institutions are now 
experiencing and their borrowers are experiencing increasing 
costs of insurance, and that affects how institutions 
underwrite loans to make sure borrowers can continue to repay 
in the future and also rely on the value of the collateral 
pledged, if any, so that has been one impact. And then, 
insurers pulling out of States has generally contributed to the 
increase in costs where insurers don't want to take the risk 
because of the increasing severity or frequency of weather 
events.
    Mr. Posey. Thank you. Very good. Mr. Gibson?
    Mr. Gibson. Another category of climate risk is transition 
risks. Those are risks from changes in market sentiment, or 
consumer preferences, or policy technology that are driven by 
climate change. For example, if a borrower has a concentration 
in a particular technology that becomes obsolete because of 
changes due to climate change and new technologies, that can be 
a risk to a bank's creditworthiness.
    Mr. Posey. Okay. Mr. Jones?
    Mr. Jones. What I would add is that I agree with Ms. 
Eberley's comment regarding insurers pulling out of certain 
States and making the costs of owning a home much more 
expensive, and credit unions have reported to us that they are 
seeing that. The other thing I would add is we have also seen 
not just on the risk side, but on the opportunity side, credit 
unions being very resilient and responding to the needs of 
their membership by designing certain consumer loan products, 
specifically targeting green energy products and the like. So, 
we have seen the business opportunity side of that as well.
    Mr. Posey. Thank you very much. Treasurer Benatar?
    Ms. Benatar. On a local level, it impacts our budgets. It 
will result in significant increases to our expenditures, which 
means that we need to make sure cash is available without 
actually selling bonds at a loss or investment positions at a 
loss to free up the money, which ultimately results in 
increases to our taxpayers.
    Mr. Posey. Thank you all very much. Mr. Chairman, my time 
is about to expire, so I yield back.
    Chairman Barr. The gentleman yields back. The gentleman 
from Illinois, Dr. Foster, is now recognized.
    Mr. Foster. Thank you. I guess I will start with Dr. 
Gibson. Looking internationally at banking regulation, are we 
considered laggards or leaders or somewhere in the mainstream 
on responding to climate change?
    Mr. Gibson. I would say we are with our international 
counterparts and other supervisors and central banks in 
identifying climate change as an emerging risk to banks and to 
financial stability, and we are all learning from each other, I 
would say.
    Mr. Foster. Okay. Thank you. And as you participate in 
forums that are funded, for example, by the financial services 
industry and so on, do you spend a lot of time looking at the 
details of who is funding the different forums, or do you look 
at the quality of the ideas presented in those forums?
    Mr. Gibson. I think we spend the most attention in the 
international forums on the content of, what can we learn from 
others? We do pay attention to who funds different forums, and 
we have ethics rules around things like that.
    Mr. Foster. Climate change is only one of the future risks 
that we have to look at. There are obvious examples like 
artificial intelligence. If I was worried about a credit union 
that provides financial services to actors and Hollywood 
screenwriters, I might be very worried about my financial 
health in the coming years due to artificial intelligence, or 
just these life-extension therapies such that it is very likely 
that many more Americans are going to be outliving their 
financial savings, their life savings on things like these 
technological threats coming out. Is there a general risk 
framework where you prioritize the different future risks, or 
do you handle these on a sort of one-off basis? I will try Mr. 
Coleman and then----
    Mr. Coleman. Thank you for that question. At the OCC, we 
are focused on the safety and soundness of the institutions we 
supervise, dating back to 2014 when the OCC implemented or 
heightened standards regulation, which addresses risk 
management frameworks for the largest, most complex banks that 
we supervise. That lays out our expectations for any type of 
emerging risks, whether they are internal or external, that 
could impact the risk profile of the institutions. We also work 
with our National Risk Committee to better understand the 
emerging risks that our examiners are seeing in the field and 
how we need to address those. If you refer to our most recent 
Semiannual Risk Perspective, you will see we have been focused 
on a variety of risks, including liquidity, compliance, and 
operational credit risk. So, we take a holistic approach 
looking at these and apply an approach to ensure that we are 
taking a risk-based assessment of these risks and how they 
could impact the institutions we supervise.
    Mr. Foster. You also have to consider exogenous risks that 
don't come from management practices inside the financial name 
to the banking industry, but also things like pandemics; there 
is a long list of things that could really disrupt it. Is there 
an ongoing process that says, here is our list of tail risks 
that we are worried about, and here is our current evaluation 
of how we should prioritize them? What is there? Is there a 
general procedure here, or is this sort of, you handle them 
individually?
    Mr. Coleman. Yes, there is. That is part of our National 
Risk Committee process, and we publicize the findings of that 
National Risk Committee twice a year in our Semiannual Risk 
Perspective.
    Mr. Foster. Do you rank the risks that you are worried 
about coming up on us?
    Mr. Coleman. In the most-recent Semiannual Risk 
Perspective, the top four risks that we identified were 
liquidity, compliance, operational risk, and credit risk to the 
largest institutions.
    Mr. Foster. Okay. But I was referring to the sort of 
exogenous risks of things that can come get you, or is your 
view that most of the real risks that you are facing are self-
generated by the banking system?
    Mr. Coleman. No. We consider risks from the outside, for 
example, cybersecurity risks, the impacts of digital 
technology, and also climate-related financial risks are 
included in that Semiannual Risk Perspective.
    Mr. Foster. Okay. I guess you have probably cost me another 
late night reading your latest report, but thank you for that. 
I was wondering, is the anti-ESG legislation, is that something 
where that is happening internationally, or is that sort of a 
peculiarity of the United States? Is anyone familiar with any 
other country doing this?
    Ms. Benatar. I am not. As far as I know, it is just here in 
the United States.
    Mr. Foster. Okay. That would be interesting, and if anyone 
has more details on that, that would be interesting. Thank you, 
and my time is nearly up, so I yield back.
    Chairman Barr. The gentleman yields back. The gentleman 
from Missouri, Mr. Luetkemeyer, who is also the Chair of our 
National Security Subcommittee, is now recognized for 5 
minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. Mr. Gibson, 
Chairman Powell has often said that the Fed will not be a 
climate policymaker. A little while ago, the chairman was 
talking about the NGFS, and it has in their statement of 
purpose the explicit purpose of mobilizing mainstream financial 
support to transition towards sustainable economy, which 
includes directing capital to green and low carbon investments. 
Is the Fed committed to promoting green energy, as the NGFS 
mission states, or is it committed to not promoting green 
energy, as Chairman Powell claims?
    Mr. Gibson. We do participate in the NGFS and the other 
international groups, but we make policy based on our own 
domestic mandates and in the best interests of the United 
States. So, I agree with Chairman Powell----
    Mr. Luetkemeyer. What do you think is in the best interest 
of the Fed to stop its involvement if you are not going to 
support their mission?
    Mr. Gibson. Our main benefit of participating in 
organizations like that is to learn from other----
    Mr. Luetkemeyer. That is a really good answer, sir. If you 
are going to be a participant, you are either going to be with 
them or against them. Sit there for information, you can go 
read the position papers to get that. Chairman Powell and the 
Fed need to either get involved with that agency or get out of 
it.
    Mr. Gibson. The standards that are agreed to by 
international organizations like that----
    Mr. Luetkemeyer. Then again, we shouldn't be listening to 
standards for international organizations. We are the United 
States of America. We are the largest economy in the world, the 
best banking system in the world. We don't need to have 
somebody else telling us how to do our job. I just can't 
believe that this is where we are headed.
    I also find it troubling that supposedly, independent bank 
regulators are now trying to insert partisan climate policies 
under the guise of helping financial institutions understand 
and guard against climate-related financial risks. Under the 
Obama Administration, FDIC Chairman Gruenberg was the godfather 
and creator of Operation Choke Point. He led and directed the 
FDIC work hand-in-hand with the Obama Administration, 
pressuring banks to cut off or reduce financial services to 
businesses that liberal progressives and President Obama didn't 
like. We found out about it, and we stopped it. To me, this 
seems like a disguised version of Operation Choke Point where 
regulators are again picking and choosing what industries have 
access to bank services and credit.
    Ms. Eberley, how is this not a different way of achieving 
the goal Mr. Gruenberg and President Obama set out with 
Operation Choke Point?
    Ms. Eberley. First, I would note that Operation Choke Point 
was a Department of Justice initiative, and our Office of 
Inspector General indicated that----
    Mr. Luetkemeyer. Ma'am, I have been in the middle of 
Operation Choke Point for 4 or 5 years. I have gotten a copy of 
an email from Mr. Gruenberg talking about this, so don't go 
there.
    Ms. Eberley. Okay.
    Mr. Luetkemeyer. Now, can you answer my question or not?
    Ms. Eberley. I will answer your question. I will tell you 
that our policy is clear, and it hasn't changed, that 
institutions that can properly manage customer relationships 
and effectively mitigate risks are neither prohibited nor 
discouraged from providing services to any category of 
customers or individual customers operating in compliance with 
applicable law. And we have processes in place to provide 
transparency and accountability around our policy, and we are 
focused on encouraging financial institutions to consider 
climate-related financial risks in a manner that allows them to 
prudently meet the financial needs of their communities.
    Mr. Luetkemeyer. Thanks for that. You can send me your 
written statement there if you are going to read something you 
was written down.
    Dr. Gibson, by its own admission, the Fed has said climate-
related financial risks are not fully understood, measured, or 
modeled. Why should the American people be comfortable with the 
Fed putting forward the idea that you can now monitor and help 
banks manage climate-related financial risks when you could not 
even effectively monitor and help banks manage the basics, like 
interest rate risks?
    Mr. Gibson. Our supervisory mission is to ensure that banks 
are operating in a safe and sound manner and managing all their 
material risks. And so for us, that definitely includes the 
traditional banking risks, as well as the emerging risks, 
climate-related financial risks.
    Mr. Luetkemeyer. It is interesting that you are talking 
about managing all your risks. A while back, we had an asteroid 
that almost hit the earth--that came close to our atmosphere. I 
suppose you probably weren't managing that risk. We had a 
volcano that exploded last week, so at 40,000 feet in the air, 
it is going to affect us somehow, some way. I don't know if you 
all are measuring that risk or not, but volcanoes do go off as 
well. You have smoke from a fire up in Canada that is affecting 
how people are doing business and living in this country right 
now. Are you guys managing any of that risk as well? Those are 
all definite risks that are here today. Did you foresee those 
things? Were you managing those risks? Anybody?
    [No response.]
    Mr. Luetkemeyer. No? So, we have a risk here that we think 
we have. I have an article here on this from the Manhattan 
Institute that states the plain, obvious fact that climate 
change is an important challenge, but climate change poses no 
measurable risk to the financial system, not individual banks, 
but to the system. The emperor has no clothes, and with that, 
my time is up, but I think----
    Chairman Barr. The gentleman's time has expired.
    The gentleman from California, Mr. Sherman, is now 
recognized.
    Mr. Sherman. I am concerned that a number of our States, 
for political reasons, are cutting themselves off from major 
financial institutions. They will end up earning less money on 
their deposits and paying higher fees and costs when they issue 
bonds. I agree with Mr. Luetkemeyer. We cannot see a return to 
Operation Choke Point, and I am concerned that bank regulators 
talk about reputational risk. Reputational risk should be 
factored in only when the bank is providing services to someone 
who is doing something illegal. But if we decide that there is 
a reputational risk to a bank, for having a bank account, for a 
customer who is very unpopular, then every time we have a 
Democratic Administration, a gun manufacturer won't be able to 
get a checking account, and every time we have a Republican 
Administration, Planned Parenthood won't be able to get a 
checking account.
    With all due respect to the fine witnesses who are here, we 
don't want to give you that kind of political power, nor should 
we. If you want to make gun manufacturers illegal or Planned 
Parenthood illegal, the way to do it in democracies is to pass 
along Congress, not prevent them from having a bank account. We 
have a policy in this committee that we will mark up 
legislation only after we have had a hearing on that 
legislation. There are a number of bills that are listed as 
part of this hearing that really don't have much to do with the 
topic of the hearing, and that seems to be a possible loophole 
or a runaround of the rules of the committee.
    And I do want to agree with Ms. Eberley's comments on 
Operation Choke Point. Would it make sense for us to be 
concerned about a bank's prudential risk, Ms. Eberley, if they 
lent all their money to the Quebec Fire Insurance Company or to 
other similarly-situated fire insurance companies as fire risks 
are going up?
    Ms. Eberley. Any kind of concentration risk that an 
institution has is something that an institution has to manage. 
We have longstanding instructions that are public on our 
website as part of our manual of examination policies.
    Mr. Sherman. And if you are concentrated in something that 
is less risky, is that less of a risk than being concentrated 
in something that is increasingly risky?
    Ms. Eberley. It would be. You have to take into account the 
range of risks that could manifest from having a concentration 
in any kind of business line.
    Mr. Sherman. And we just went through a process by which 
banks ignored the fact that interest rates could, and probably 
would go up. It felt good to say that inflation is transitory 
and interest rates aren't going to go up, but there was a real 
possibility that they would. Thank God, our blindness on that 
was not fatal. We now have climate risk. We shouldn't blind 
ourselves to the warming planet any more than we blinded 
ourselves to inflation and interests going up.
    Dr. Gibson, do we expect that those things that are 
affected by rising temperatures will become more risky?
    Mr. Gibson. I think we are concerned that climate-related 
financial risks are an emerging risk that we don't know enough 
about, so we need to learn more in order to be able to answer 
questions like there----
    Mr. Sherman. And I would point out that we also ought to be 
looking at the China risk. There is a significant possibility 
of a rupture in that trading relationship, and many of the 
borrowers are very dependent on the China distribution chain. 
So, this may be the only--this month at least--topic of our 
committee. This is, I think, our 412th hearing that has 
something to do with ESG just this month, but I hope you are 
looking at other risks as well, excluding the China risk, and I 
yield back.
    Chairman Barr. The gentleman's time has expired. The Chair 
now recognizes himself for 5 minutes for the purpose of asking 
questions.
    Dr. Gibson, I would like to kind of continue on with some 
of the questioning that Mr. Barr and Mr. Luetkemeyer did 
regarding the pilot climate scenario analysis that happened 
earlier this year. Specifically, the exercise instructions make 
repeated references to the Board's involvement throughout the 
process. In fact, the instructions say that the Board designed 
the pilot CSA exercise, the Board will engage with 
participants, and the Board anticipates publishing insights. 
All this to say that the pilot CSA instructions seem to 
indicate that the plan actually originated with and has the 
support of the Board. So, my first question is, did the Federal 
Reserve Board vote in support of conducting the pilot CSA?
    Mr. Gibson. The full Board of Governors did not vote on the 
climate scenario analysis because it is purely an exploratory 
exercise.
    Chairman Barr. So, there was no vote. You said the full 
Board did not. Are you saying there was no vote at all?
    Mr. Gibson. I am saying that the Board didn't vote on the 
climate scenario analysis exercise because it was a purely 
exploratory, because of its exploratory nature.
    Chairman Barr. Okay. So the short answer is, no, the Board 
did not vote?
    Mr. Gibson. No, the Board did not vote.
    Chairman Barr. Okay. Which Board members have been working 
on the CSA exercise?
    Mr. Gibson. The exercise is being conducted by the Federal 
Reserve's staff under the direction of Vice Chair for 
Supervision Barr, and he keeps the other Board Members informed 
about the progress of what we are doing in supervision.
    Chairman Barr. So, you are saying that other than Vice 
Chair Barr, no one on the Board has been engaged in working 
with the CSA?
    Mr. Gibson. The other Governors have been informed about 
it, but the actual work has been done by the staff.
    Chairman Barr. Why would the instructions then say that the 
Board designed the pilot CSA exercise, the Board will engage 
with participants, and the Board anticipates publishing 
insights? What you are drawing is a scenario that the Board was 
separate from all of this, but yet the instructions tend to 
indicate the opposite.
    Mr. Gibson. I would have to look at the instructions, but I 
think they are using the word, ``Board,'' as a shorthand for, 
``Board of Governors of the Federal Reserve System,'' meaning 
the entire agency.
    Chairman Barr. Okay. I would appreciate it if you could 
look into that, because I think that is a question that needs 
further exploration, as the instructions indicate that this is 
originating from the Board, but what I am hearing from you is, 
that isn't the case, so I think we need to get to the bottom of 
it. I will move on to another question then, the pilot CSA 
promotes scenarios using models from the Network for Greening 
the Financial System. So, where does the funding for these 
models come from?
    Mr. Gibson. The pilot climate scenario analysis exercise 
uses a range of scenarios. It does use some of the scenarios 
that were developed by the NGFS as an input. Those are common 
scenarios that are used by banks in their own internal risk 
management, and when we were designing the scenarios for the 
pilot climate scenario analysis, it was easiest to use 
scenarios with which banks were already familiar.
    Chairman Barr. Are you getting to the funding aspect? The 
question was the funding of the scenarios and models.
    Mr. Gibson. I don't know anything about the funding, but 
the NGFS publishes the scenarios on their website, so the banks 
use them from the website.
    Chairman Barr. Okay. You don't know where the funding for 
this comes from? Does the Board formally endorse these models 
and scenarios produced by the NGFS?
    Mr. Gibson. The scenarios are just intended to capture a 
plausible range of future outcomes. They are not a forecast or 
a prediction.
    Chairman Barr. Okay. I know you all have been really 
prepared, but I think you all are skirting around these 
questions. Does the Board formally endorse the models and 
scenarios produced by the NGFS, or is that something you are 
considering?
    Mr. Gibson. I don't think we have endorsed them, but we are 
using them as part of our pilot climate scenario analysis.
    Chairman Barr. Okay. I see my time is running short, so in 
the interest of giving others the chance to come in, I will 
submit the rest of my questions for the record, and I yield 
back.
    And the Chair recognizes the gentleman from Texas, Mr. 
Green, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. I thank the witnesses 
for appearing, and I would like to assure the witnesses that 
you are doing the right thing. I don't want you to have any 
consternation or reservation about your fiduciary duty and 
about how you are carrying it out. Here is some intelligence 
that I think will provide us a better view of what is 
happening.
    More than 80 percent of U.S. investors said that companies 
need to more openly communicate the risk around ESG-related 
factors. Seventy-three percent said they are more likely to 
invest in a company that shares with investors its plans to 
effectively manage these factors, that people want to know what 
is going on, and they want to know what is going on with these 
investors because in Houston, we had a flood of biblical 
proportions, over a trillion gallons of water. We currently 
have raging wildfires that could rival even what Dante created 
in his mind. We have insurance companies that are leaving 
Florida and California, major companies, because of climate-
related issues.
    You have a fiduciary responsibility. You have a legally-
required obligation to do what you can to make sure investors 
are aware of what they are investing in. I believe this, and I 
believe you believe this. But if you agree with me that you 
have this fiduciary responsibility, would you kindly extend a 
hand into the air? If you believe you have a fiduciary 
responsibility, please extend a hand into the air?
    [Hand raised.]
    Mr. Green. Only one person has a fiduciary responsibility, 
so the rest of you are not fiduciaries. You don't have a 
responsibility to make sure that you provide proper 
intelligence to people who are investors?
    Mr. Gibson. I would say our mandate relates to supervision 
of banks and making sure that banks are adequately managing the 
risks, including climate-related financial risks.
    Mr. Green. Does that makes you a fiduciary?
    Mr. Gibson. I am not sure what you are asking.
    Mr. Green. Let me ask this----
    Mr. Gibson. People are responsible for ensuring safety and 
soundness----
    Mr. Green. Okay. Let's replace it with, ``responsible.'' If 
you believe you are responsible for providing investors good 
information about climate material risk associated with it, 
would you raise your hand, please?
    Mr. Jones. Congressman, I just wanted to explain why I am 
not raising my hand.
    Mr. Green. Please do.
    Mr. Jones. It is because credit unions are nonprofit 
cooperatives, not private companies that have stock investors 
in their life, so that is the reason I am not raising my hand.
    Mr. Green. Do you believe you have a----
    Mr. Jones. But I would say I have a fiduciary 
responsibility to the Share Insurance Fund in the credit union 
system to ensure that they are resilient and operate in a safe 
and sound manner.
    Mr. Green. And in doing that, your investors, as it were, 
the people who are depositors----
    Mr. Jones. The members of the credit union, yes.
    Mr. Green. ----are protected?
    Mr. Jones. Yes.
    Mr. Gibson. I would say we have a responsibility to ensure 
that banks are adequately measuring and managing their risks, 
including climate-related financial risks. We definitely have 
that responsibility.
    Mr. Green. Okay. I don't know how that differs from what I 
have been asking you, but let's go on, please.
    Ms. Eberley. I would say we don't have responsibilities 
around banks' financial disclosures, and the question about 
disclosures to investors, presumably shareholders, was how----
    Mr. Green. Not to invest necessarily, but to those over 
whom you have the supervisory authority, we have to make sure 
that they are considering the climate issues that are material.
    Ms. Eberley. It is our responsibility to make sure that 
banks are considering the risks that they face and that they 
are managing those risks properly, yes.
    Mr. Green. Yes. So as to those banks, you have a 
responsibility?
    Mr. Coleman. Yes, we have a responsibility to ensure the 
safety and soundness of the institutions we supervise and that 
they are properly identifying any emerging risks. It is the 
banks who have initially identified these emerging risks dating 
back several years, and we are using that information to better 
understand how those risks could impact the financial stability 
of those institutions.
    Mr. Green. Okay. Do you believe that you have a 
responsibility to understand and communicate the material risk 
associated with climate change as it relates to your various 
areas of endeavor? Do you believe you have that responsibility?
    Ms. Eberley. I would say it just slightly differently, that 
we have a responsibility to make sure that banks are 
understanding the risks that they are facing and that they are 
managing.
    Mr. Green. Okay. Do you believe that those that you 
regulate have the responsibility to understand the risk with 
which they have to deal?
    Ms. Eberley. Yes, sir.
    Mr. Jones. Yes.
    Mr. Green. Okay. If you believe this, raise your hand.
    [Hands raised.]
    Mr. Green. I want to capture this picture. Thank you.
    Chairman Barr. The gentleman's time has expired. The 
remaining witnesses can respond for the record.
    The gentleman from Tennessee, Mr. Rose, is now recognized 
for 5 minutes.
    Mr. Rose. Thank you, and I want to thank Chairman Barr and 
thank our witnesses for being here to participate in this 
hearing today.
    Mr. Gibson, one of the justifications Vice Chair Barr has 
given for increasing capital requirements on U.S. banks is 
because the Federal Reserve is implementing Basel III. Mr. 
Gibson, do you attend and represent the Federal Reserve in any 
Basel meetings and negotiations?
    Mr. Gibson. Yes, I do.
    Mr. Rose. And, Mr. Gibson, is your position, or that of 
Vice Chair Barr, that you take when you go to negotiate on 
behalf of the U.S. at Basel agreed to by a vote of the Federal 
Reserve Board?
    Mr. Gibson. Standards that are discussed in Basel aren't 
binding on the Federal Reserve, so the Board votes on 
regulations that it proposes under its domestic mandates.
    Mr. Rose. Thank you. Mr. Gibson, has Congress recognized 
the Basel Committee as an international organization that 
should have standing to dictate regulatory rules that can have 
major impacts on the U.S. economy?
    Mr. Gibson. I don't know about Congress, but we don't 
implement standards that come from the Basel Committee just 
because they are agreed to in Basel. We would go through a 
domestic rulemaking process following our domestic procedures.
    Mr. Rose. I am just concerned that what is actually 
happening is that Vice Chair Barr, with a select few staff, can 
go to the Basel Committee and negotiate major initiatives that 
have significant impacts on the U.S. economy, and then come 
back and use that as a rationale to adjust capital 
requirements.
    Mr. Gibson, New England, New York, and Pennsylvania have 
all seen greenhouse emissions rise following the closure of 
nuclear power facilities. As a member of the Network for 
Greening the Financial System, does the Fed believe that 
cutting nuclear power increases or decreases the risk in the 
financial sector?
    Mr. Gibson. I don't know that we have a view on that 
particular question. Our responsibilities with respect to 
climate-related financial risks are narrow, but important.
    Mr. Rose. Okay. On June 21, 2018, climate activist, Greta 
Thunberg tweeted that, ``A top climate scientist is warning 
that climate change will wipe out all of humanity unless we 
stop using fossil fuels over the next 5 years.''
    Ms. Benatar, it has been 5 years since that pronouncement. 
Yes or no, has climate change wiped out all of humanity?
    Ms. Benatar. I have a duty to my constituents, and in my 
community, we have seen record floods, record fires----
    Mr. Rose. But I think it is safe to say that we are all 
still here, absent the normal tragedies that happen to humanity 
and humankind, so the pronouncement obviously was over the top 
and not true. And whether or not human activity is affecting 
the climate remains an area of active interest and something 
that we should continue to be vigilant and aware of. But we 
also know the history of the world, or at least we can surmise 
from the data that we have, and we have seen the entire planet 
melt off and be without ice. We have seen it virtually frozen 
over. All of that happened in a time when human activity wasn't 
occurring. And so, one of the hallmarks of the development of 
human civilization and this humankind is that we have managed 
to adapt to the changes. So, while we ought to be careful about 
what we do, I think going all the way back to the 
pronouncements of Malthus a few centuries back, we ought to be 
mindful that sometimes we don't have the proper perspective, 
and I am just curious what your reflection on that question 
was?
    Mr. Jones, what would you say has been NCUA's experience 
with credit unions that are Community Development Financial 
Institutions (CDFIs) grant recipients over the last 12 months, 
and has NCUA received feedback about the application and 
certification process?
    Mr. Jones. We have received feedback. I would like to say 
that the CDFI process is run by the Department of the Treasury. 
We do understand that some credit unions have had some 
difficulty, and the chairman has engaged directly with the 
Department of the Treasury on that because we have an interest 
in ensuring that credit unions have access to CDFI funds and 
remain available to help their members.
    Mr. Rose. Thank you. I appreciate that. I yield back.
    Chairman Barr. The gentleman's time has expired. The 
gentlewoman from Ohio, Mrs. Beatty, is now recognized for 5 
minutes.
    Mrs. Beatty. Thank you, Mr. Chairman, and Mr. Ranking 
Member, and thank you to the witnesses for your patience here 
with us today as we explore this.
    My first question will go to you, Treasurer Benatar. Like 
many of my colleagues, I represent a great deal of banks, and 
insurance companies, and other financial institutions that 
certainly, as you know, provide financial services to consumers 
across the country. It is my opinion that these institutions 
are already taking climate-related financial risks. By your own 
words, as experts, you have said, in relationship to climate-
related risks, that they are extreme, they are emerging, they 
are rising risks that could put our institutions at issue, we 
are still evaluating the situation, most people must learn to 
understand, and it is trending nationally.
    So with that, to me, it makes good business sense to take 
these factors into consideration because these institutions 
also have been very vocal in their opposition to State-level 
Republican-led bills that limit the use of climate-related 
factors in their business. Can you discuss for me why financial 
firms want to consider these risks and why it is good for the 
bottom line?
    Ms. Benatar. Thank you for the question. For us, it is 
about our taxpayers. It is about our constituents. We all 
represent our constituents back home, and at the end of the 
day, if we are not including those climate risks, if these 
financial institutions are not including this in their analysis 
of whether they even want to loan money to my fire district, do 
they want to risk lending money to a government entity if there 
are fires and flooding happening in our community, knowing that 
costs will go up without understanding what I am doing as a 
fiduciary to address those issues? That is something that I am 
being asked by our financial institutions when we talk about 
credit lines, for example, but I should also be asking the same 
thing when I am looking at whom I do business with, but I 
should be managing it.
    Prior to me being treasurer, we had seen flooding and fires 
that did take lives in my community, and destroy houses. We 
were not prepared for that. We had to sell at a loss, and I 
don't want to do that again.
    Mrs. Beatty. Mr. Jones, can you discuss the impact it would 
have if climate-related multibillion-dollar risks are ignored, 
how would it affect lending or credit unions in business?
    Mr. Jones. Sure. In our preliminary research, we determined 
that roughly a third of credit unions and Minority Depository 
Institutions (MDIs) are located in communities that are at 
relatively high or very high risk from natural disasters.
    Mrs. Beatty. That was going to be my next question, to talk 
about MDIs.
    Mr. Jones. Let me get ahead of you.
    Mrs. Beatty. No, that is great.
    Mr. Jones. And it is particularly, like I said, profound 
with Minority Depository Institutions. Because of that, in our 
agency's view, credit unions really know their communities 
well, but our interest is in learning about it. So, I think 
that credit unions really have to pay attention to these risks 
and any other risks that could be material.
    Mrs. Beatty. Okay. That gives me a different direction I 
want to go in, and you can thank Mr. Jones, Mr. Gibson, for 
your next question. Mr. Gibson, research shows us that the 
impact of physical and transition risks are uneven across 
locations, income, race, and age. This is due to geographic 
reasons as well as regions' ability to adapt to these risks. 
The natural progression of this thought process is that efforts 
to adapt to climate change and take these risks into 
consideration would also have an effect on existing inequality. 
What are your thoughts on this, and how is the Fed taking these 
inequality implications under consideration?
    Mr. Gibson. Our supervisory perspective is really around 
ensuring that banks are measuring and managing all of their 
material risks, including the climate-related financial risks 
that you asked about. It certainly could have broader effects 
on things like inequality, but, really, what we are looking at 
now is how banks are developing their capacity to really 
measure and understand these risks. So we see firms investing 
in data and models. To better understand the factors that you 
are asking about, I think we all still have a lot to learn 
about what the impacts will be.
    Mrs. Beatty. Thank you, Mr. Chairman. My time is almost up, 
so I yield back.
    Chairman Barr. The gentlelady yields back. The gentleman 
from Texas, Mr. Williams, is now recognized for 5 minutes.
    Mr. Williams of Texas. Thank you, Mr. Chairman. The Federal 
Reserve has established a pilot climate scenario analysis 
exercise--that is a lot of words for a guy from Texas--which 
requires the six largest banks to manage climate-related 
financial risks. This requirement is extremely out-of-touch and 
increases burdens on financial institutions. And the Vice Chair 
for Supervision, Mr. Michael Barr, has taken the lead on this 
initiative without a vote from the Board and claims that the 
exercise will support the Board's responsibilities, but climate 
regulation is not a part of these responsibilities. This is a 
slippery slope and shows that the priorities of the Federal 
Reserve are shifting towards greenwashing our financial system, 
which is ignoring true risks like debt limit impasses and 
unsustainable Federal spending, leading to a higher national 
debt.
    So, Mr. Gibson, a few months ago when Chairman Powell was 
testifying before this committee, he said that the Federal 
Reserve is not and will not be a climate regulator. Do you 
believe that the Federal Reserve should be or should not be a 
climate regulator, and is this climate scenario analysis part 
of the Fed's holistic review for increasing capital 
requirements?
    Mr. Gibson. I agree with Chair Powell that the Federal 
Reserve is not a climate policymaker and the pilot climate 
scenario analysis exercise won't have any implications for 
banks capital, so it is different from the holistic capital 
review.
    Mr. Williams of Texas. Good. Now, the FDIC, the Federal 
Reserve, and the OCC have all issued their own draft principles 
for climate-related financial risk. These are all policies that 
should not be decided by independent regulators. These 
principles are taken straight out of the Biden Administration's 
hands in an attempt to promote policies by banking regulations. 
Regulators cannot be truly independent if they regulate from 
the Biden playbook.
    One such principle posed by the Fed suggests that a bank's 
board of directors should consider tying compensation policies 
to risks associated with climate change, and that decisions, 
like compensation, should be made solely by the board of 
directors and should not be influenced by any outside parties. 
Financial regulators have an obligation to stay truly 
independent of the political arena by not getting involved.
    Mr. Coleman, you are jeopardizing the OCC's credibility by 
becoming proxies for the Biden Administration's radical climate 
groups. So, is the OCC following the direction of an Executive 
Order, the FSOC, or other interest groups to insert climate-
based policies into bank regulations, and do the OCC principles 
ask bank boards to consider tying compensation to climate 
change measures?
    Mr. Coleman. Thank you for the question. The OCC is focused 
on the safety and soundness of the institutions we supervise. 
We are not focused on social or environmental issues. We are 
simply focused on ensuring that these climate-related financial 
risks are identified, properly managed, properly monitored, and 
properly controlled. We issued the principles with the idea of 
providing feedback based upon information we have received from 
the institutions that we supervise, dating back as early as 
2019, with them raising issues with us about how they should 
manage those risks and how they should properly identify those 
risks consistent with our expectations for a risk management 
framework.
    Mr. Williams of Texas. My last question here briefly is, 
financial regulators should not be in the business of picking 
winners and losers. We see that with this Administration 
constantly, but, unfortunately, now they are. Now, these 
actions are being made under the disguise of transitioning away 
from reliable energy like oil and gas, and channeling credit 
towards green energies. So by following the lead of 
international agencies and pressuring financial institutions to 
adopt climate-related policies, regulators are fixing the 
market and abandon all-of-the-above approach. U.S. energy needs 
cannot be met solely by renewables, and regulators should not 
be in the practice of giving one energy sector an advantage 
over the other. Remember, I am from Texas.
    So, Mr. Gibson, has the Federal Reserve been facing 
pressure to channel credit away from certain energy sectors and 
moving it towards green sectors?
    Mr. Gibson. It is not the Federal Reserve's policy to 
discourage banking organizations from offering accounts or 
services to any class or type of law-abiding business.
    Mr. Williams of Texas. Okay. If you just stay with what you 
are designed to do, small business guys like me can survive. I 
hope you do. I yield back my time.
    Chairman Barr. The gentleman yields back, and now the 
gentleman from Illinois, Mr. Casten, is recognized for 5 
minutes.
    Mr. Casten. Thank you, Mr. Chairman. I want to start this 
with a little bit of history to set us up for the vast majority 
of human history on this planet. Atmospheric CO2 was pretty 
stable at about 260 parts per million. It started going up 
during the Industrial Revolution, took about 200 years, until I 
was born in 1971, after the Industrial Revolution started, by 
which point it had gone up about 80 parts per million, and was 
then at 320. In the 51 years I have been on this planet, it has 
gone up by another 100 parts per million because of all the 
fossil fuel burned. Fifty percent of all the CO2 we have ever 
emitted as a species has been since I graduated from college in 
1993.
    Do you all agree that anthropogenic combustion of carbon is 
the primary cause of global warming? Yes or no? Does anybody 
disagree with that?
    [No response.]
    Mr. Casten. Okay. I am happy to have the silence because 
last Wednesday, one of my Republican colleagues on the 
subcommittee said in a hearing, I know a comment was made about 
belief in anthropogenic global warming or climate change, or 
whatever you want to say it is, ``I don't think the science is 
settled.'' This is obscene. If you had a Member of Congress who 
said, I don't believe in the laws of gravity, we would go out 
of our way out of love and respect for them and their family to 
keep them away from the Speaker's balcony. And yet, in today's 
Republican caucus, denying the laws of physics puts you on a 
path to leadership.
    Let me now shift to areas under U.S. jurisdiction. In 
October of 2021, the Financial Stability Oversight Council's 
report on climate-related financial risk, which you were all 
members of, with the exception of Ms. Benatar, for the first 
time identified climate change as an emerging threat to U.S. 
financial stability. Do all of you believe that the physical 
and transition risks from climate change can threaten financial 
stability? Yes?
    [Nonverbal response.]
    Mr. Casten. Nods across-the-board. I say that because we 
are here with people criticizing you for doing too much. I 
think there is a fair criticism that you are not doing enough.
    Dr. Gibson, I have talked to some of your colleagues. We 
are seeing huge movements of capital from the insurance 
industry, with parts of Florida, parts of California, and parts 
of Louisiana no longer being insured. If we are only going to 
limit our examination of financial risk to the banking sector 
or to the six big banks, we are staying blind too long to the 
larger disruptions in our economy. And I think we need to do 
much more than we are doing to make sure that we protect folks, 
but that is a longer conversation than we have time for here.
    Treasurer Benatar, you are trusted to safely and prudently 
manage the public's money. Do you have a responsibility to 
evaluate all risks?
    Ms. Benatar. Absolutely. I have to evaluate all risks, and 
I just want to say that right now in Arizona, we are seeing the 
heat.
    Mr. Casten. No doubt.
    Ms. Benatar. No doubt.
    Mr. Casten. And are the anti-ESG bills that are being 
passed restricting your choice?
    Ms. Benatar. Absolutely.
    Mr. Casten. You mentioned in your testimony some of the 
costs of these bills: $6.7 billion in Indiana; $3.6 billion in 
Kansas; and $70 million in Kentucky. Who is bearing the brunt 
of these costs?
    Ms. Benatar. Our taxpayers. Your constituents.
    Mr. Casten. And the firefighters, and the policemen, and 
the pension holders, and everybody who depends----
    Ms. Benatar. Absolutely, in our taxing districts.
    Mr. Casten. Now, you are the Minority witness, And I say 
that with love and respect. There are folks from very 
Republican areas who completely agree with you. In Kentucky, 
the board chair of the Kentucky County Employees Retirement 
Fund System said the anti-ESG law is inconsistent with its 
fiduciary responsibilities with respect to the investment of 
assets or other duties imposed by law.
    In Indiana, an official from the Indiana Chamber of 
Commerce, not a lefty woke organization, said, ``We believe the 
anti-ESG bills are anti-free market and anti-free enterprise.'' 
Is anybody listening? My God.
    In Texas, the executive director of the Texas County & 
District Retirement System said, ``We have concerns that the 
anti-ESG bill could impair our ability to maximize our returns 
and have a financial impact for our employers.'' This is real-
stuff fiduciary. Thank you, Madam Ranking Member.
    Now look, all of us on this side of the dais have the 
privilege of writing laws. We get to debate laws. We get to 
argue about what should be in those laws. It is a tremendous 
responsibility. It is a tremendous duty. I still pinch myself 
every day that I get to do this. That power does not extend to 
the laws of physics. It does not extend to the laws of 
capitalism and free market economics. We have the ability to 
ignore them. We have the ability to write a law that says, ``Go 
to the Speaker's balcony and jump.'' We have the ability to 
write a law that says, ``Let's destroy free markets, let's make 
the U.S. no longer attractive to innovators and entrepreneurs 
that make us the envy of the free world.''
    Let's stop all that by ignoring the laws of economics, by 
opposing free markets. Just because we have that power doesn't 
mean that it is our obligation to use it. I have been saying 
this all ESG month. I really hope that it someday once again 
becomes bipartisan to support competitive markets and the laws 
of physics. I yield back.
    Chairman Barr. The gentleman yields back. The gentleman 
from Wisconsin, Mr. Fitzgerald, is recognized for 5 minutes.
    Mr. Fitzgerald. Thank you, Mr. Chairman. On September 29, 
2022, the Fed established the pilot climate scenario analysis 
exercise to measure and manage climate-related financial risks. 
However, the covered institutions already measure relevant 
financial risks and do not need the enhancement and help 
promised by the Fed. I am not an accountant, but I had a 
roommate in college who was studying to be an accountant, and I 
just remember the Basic Principles of Accounting, which was a 
book about this thick. It was very principled. There are 
certain things you do when it comes to accounting and certain 
things you don't. There are certain things you consider and 
other things that you would never consider.
    And my colleague who just spoke kind of reminded me that 
when it comes to ESG, or as he framed it, ``ESG month,'' there 
should be some variance in there. And I have always thought, 
not only as a State legislator, but now as a Member of 
Congress, that there are certain things we can do voluntarily 
if we want to move forward, if we have questions about the 
environment, or social governance that are important, I think 
that should be factored in, but it shouldn't change the basic 
principles of the way the boardroom works. And I think that is 
why not only in this committee, but in other committees that I 
serve on, the focus on ESG is because we don't know what the 
impact would be if we kind of change the rules of where we are 
at on many of these things.
    The Fed has stated that increased capital requirements form 
the holistic capital review and the Basel III Endgame 
requirements will be implemented in the long-term.
    Mr. Gibson, does the perceived long-term implementation of 
increased capital requirements contemplate the potential to 
turn climate scenarios into regular climate stress testing?
    Mr. Gibson. That is not part of the current work plan, no.
    Mr. Fitzgerald. And have there been any discussions about 
increasing capital requirements on banks over the next several 
years, and then doing so again under the climate stress testing 
regime?
    Mr. Gibson. No. The climate scenario analysis exercise 
doesn't have any implications for capital requirements.
    Mr. Fitzgerald. Right. And in January 2023, in a Federal 
Reserve Research paper entitled, ``What are Large Global Banks 
Doing About Climate Change,'' the authors wrote, ``Our paper is 
closely related to a report by InfluenceMap 2022.'' 
InfluenceMap is a London-based think tank devoted to the 
mission to, ``hold the corporate and finance sectors 
accountable for climate performance.''
    It is just a completely separate agenda from what anybody 
should be considering when it comes to finance. And in attempts 
to use name-and-shame tactics, and the way it is funded by 
several entities, including the ClimateWorks Foundation, which, 
in turn, is funded by several entities, including Bloomberg 
Philanthropies, the Chan Zuckerberg Initiative, and the High 
Tide Foundation, amongst others, there is an agenda there. 
There is absolutely an agenda, and if we don't look at this 
clearly, I think we are all going to fall for this game of 
propaganda and a movement away from what I said earlier, the 
basic foundation of accounting principles.
    Mr. Gibson, is the Federal Reserve following the lead of 
outside international think tanks, and advocates, and activists 
of climate policy change in efforts to try and pressure or push 
financial institutions toward climate policy directions right 
now?
    Mr. Gibson. No.
    Mr. Fitzgerald. And the final thing I will just say, 
because I am going to run out of time, is there is absolutely a 
pressure. I have spoken to CFOs and CEOs, and sometimes they 
are even unaware of how their own corporations have responded 
to this. I remember there was a dinner I attended at which I 
asked the CEO, tell me what you think about ESG, and he said, 
oh, it is not something we are involved in. It is not something 
that we talk about at any of our corporate meetings. But the 
fact of the matter is, 2 days later, I had a staff person come 
to me and say, look at their website. Their website had a full 
two pages on ESG. So, it really raised a question in my mind, 
are some of the corporate leaders even aware of what is going 
on within their own companies? And I think the answer to that 
is, no. I yield back.
    Chairman Barr. The gentleman's time has expired. The 
gentlewoman from Massachusetts, Ms. Pressley, is now 
recognized.
    Ms. Pressley. Thank you. And thank you to our witnesses for 
joining us today.
    From the scorching heat in the South to the historic 
flooding in the Northeast, including in the Commonwealth of 
Massachusetts, which I represent, it is clear that time is 
really running out to avoid the worst effects of climate 
change. Four of our witnesses here today represent Federal 
agencies who sit on FSOC. The report that you put out 2 years 
ago stated that, ``Climate-related financial risks will become 
more acute if not addressed promptly.''
    While it is certainly encouraging to see your agencies take 
the risk of climate change seriously, 2 years later, it is very 
discouraging--and that is probably the understatement of the 
year--that Republicans in Congress on this very committee are 
obstructing efforts to prevent and mitigate devastating harm to 
working families and to our economy. As my grandmother used to 
say, denial is not just a river in Egypt.
    Mr. Coleman, the OCC's mandate focuses on the safety and 
soundness of the financial system. When it comes to climate 
change, if a bank has weaknesses in its risk management system, 
obviously this could adversely affect not only a bank's safety 
and soundness, but also the overall financial system. So, yes 
or no, in light of this, do you agree that the OCC has the 
authority and is, in fact, obligated to address those risks?
    Mr. Coleman. The OCC is obligated to address climate-
related financial risk just as we are with any emerging risks.
    Ms. Pressley. So, yes or no?
    Mr. Coleman. Yes.
    Ms. Pressley. Thank you. This past weekend, we saw heavy 
rain and flash flooding in my district, the Massachusetts 7th, 
and just last week, flooding in the region in Vermont caused 
the OCC to allow financial institutions to close. As climate 
change continues to cause more and more physical damage to our 
communities, we see more financial institutions close in 
frontline communities for the very same reasons. However, the 
people who are the most hurt by these closures are low-income, 
working-class families, especially when it occurs at a time 
when they may need financial services the most.
    Mr. Coleman, what steps is the OCC taking to ensure that 
financial institutions can continue to serve their communities 
through growing climate-related financial risks, like the flash 
flooding that my constituents experienced last week?
    Mr. Coleman. Thank you for the question. Our focus at the 
OCC is on the largest, most-complex banks, with over $100 
billion in assets, and how they are addressing climate-related 
financial risks. In terms of community banks, we believe that 
these community banks have operated for decades in their 
communities. They are very familiar with the impact of weather-
related events on their communities, on their businesses, and 
on their local clientele. We think they have the best knowledge 
of how to meet the needs of those communities. In addition to 
that, our Acting Comptroller has made an effort to get out and 
meet with community bankers to make certain they are aware of 
our efforts and make certain they are aware of what we are 
doing as it relates to climate-related financial risk.
    Ms. Pressley. Thank you. I request unanimous consent to 
enter into the record a recent working paper from the European 
Central Bank entitled, ``The Impact of Global Warming on 
Inflation.''
    Chairman Barr. Without objection, it is so ordered.
    Ms. Pressley. This paper found that climate change poses 
risks to price stability and will result in higher inflation, 
including hiking up the cost of food.
    Director Gibson, this strikes right at the essence of the 
Fed's mandate. What steps is the Fed taking to better 
understand the implications of climate change to price 
stability and the financial system as a whole?
    Mr. Gibson. My area is supervision, so I can really only 
speak to that. I would say the Fed conducts research on a range 
of topics, including inflation, in other parts of the Fed.
    Ms. Pressley. Regulators must not delay action on climate 
change. Climate risks are growing by the day. Working families 
bear the brunt of this damage and we really do need concrete 
action now to avoid further catastrophe. Thank you, and I yield 
back.
    Chairman Barr. The gentlelady yields back. The gentleman 
from South Carolina, Mr. Timmons, is now recognized for 5 
minutes.
    Mr. Timmons. Thank you, Mr. Chairman. I think it is 
important to highlight how we got here and why these hearings 
on ESG are necessary. Woke ideology used to be an abstract idea 
on Northeastern liberal arts campuses, but now it is top of 
mind, and it has seeped into many of our government 
institutions and almost every corner of our society.
    The Biden Administration's woke policies have become their 
top priorities, committing billions of dollars to climate 
justice, and now corporations feel beholden to the woke mob. 
Just ask Bud Light what happens when you give in to the loudest 
voices. As the saying goes, ``Go woke, go broke.'' Their recent 
campaign has resulted in a 28-percent drop in sales, relegating 
their status as the number-one beer in America for nearly 2 
decades down to number two, and it is in a free fall. Costco 
just removed them from their shelves. Perhaps the silent 
majority isn't so silent, at least regarding spending their 
hard-earned money.
    Continuing on our committee's theme of ESG this month, 
today's hearing is about how woke ideology foot soldiers now 
staff our bank regulators and how the Biden Administration is 
using these foot soldiers to push our financial institutions 
into promoting woke climate policies. When it comes to woke 
policies, what this Administration can't legislate, they will 
regulate.
    Mr. Gibson, does the Fed believe that it should follow the 
lead of the European Central Bank in tying monetary policy, 
collateral policies, and asset purchase policies to 
consideration of climate change to help promote green financing 
and the channeling of credit from some sectors to others?
    Mr. Gibson. Those aren't things that the Federal Reserve 
has been doing, no.
    Mr. Timmons. Do you think it is something that should 
happen or that could happen?
    Mr. Gibson. My area is supervision. You are asking 
questions about monetary policy, so I don't have any knowledge 
about whether that is something that the Federal Reserve is 
doing.
    Mr. Timmons. It is not going well for Europe. I hope we 
don't start it here. By its own admission, the Fed could not 
even effectively monitor and help banks manage interest rate 
risks. Why should we be comfortable with the Fed putting 
forward the idea that it can now monitor and help banks manage 
climate-related financial risks that, again, by its own 
admission, the Fed identifies, as not fully understood, 
measured, or modeled?
    Mr. Gibson, do you agree that it should focus on its main 
mission and not go into these other areas?
    Mr. Gibson. With respect to supervision, our mission is to 
ensure that banks operate in a safe and sound manner and manage 
all their material risks, including climate-related financial 
risks.
    Mr. Timmons. Federal Reserve Chairman Powell has said that 
the Fed has narrow but important responsibilities to use the 
oversight of banks to ensure they manage the balance sheet risk 
created by climate change. For each of you, does your agency 
also believe that they have only narrow responsibilities to 
provide oversight of banks to ensure they manage risks and 
nothing more? Mr. Gibson, I know where the Fed stands.
    Mr. Coleman, I will start with you.
    Mr. Coleman. At the OCC, our mandate is to ensure the 
safety and soundness of the institutions we supervise and 
ensure that they are managing all of those risks, including any 
emerging risks. That is very consistent with the frameworks 
that we have laid out, including our heightened standards 
expectations, and the banks have identified and we have 
identified that climate risk and climate-related financial risk 
is an emerging risk to the institutions.
    Mr. Timmons. Do you believe that is a narrow 
responsibility, or do you think that it is broad? Do you think 
it should supersede fiduciary obligations to their customers 
and to their shareholders?
    Mr. Coleman. We are not in the business of telling banks 
whom they can or cannot bank. Our focus is on the safety and 
soundness of the institutions we supervise.
    Mr. Timmons. I wish the Biden Administration would agree 
with you.
    Ms. Eberley, what are your thoughts?
    Ms. Eberley. My thoughts are consistent with my colleagues. 
Our focus is on the safety and soundness of financial 
institutions and how they manage the risks that are presented 
in the areas where they are operating and the customers that 
they are serving.
    Mr. Timmons. And you would agree that a return on a 
shareholder's investment is the fiduciary obligation of 
whatever entity we are referencing, and that should be first 
and foremost?
    Ms. Eberley. That is not within our area of responsibility. 
We are focused on safety and soundness.
    Mr. Timmons. Mr. Rendell, what are your thoughts?
    Mr. Jones. The NCUA is focused on the safety and soundness 
of federally-insured credit unions and the National Credit 
Union Share Insurance Fund.
    Mr. Timmons. Thank you. Mr. Chairman, I yield back.
    Chairman Barr. The gentleman yields back. The gentleman 
from Tennessee, Mr. Ogles, is now recognized.
    Mr. Ogles. Thank you, Mr. Chairman, and to the panelists, 
we are almost there, and we appreciate you being here.
    Dr. Gibson, the Fed has considered the notion of double 
materiality in micro/macro prudential supervision. The idea is 
that supervisory authorities should consider both the risks 
that the banks face from climate change, such as more losses if 
there are more floods, but also the impact of actions by the 
banks on climate change, such as making loans to some where the 
activity of the borrower allegedly makes climate change worse. 
For example, if a bank provides loan to certain sectors deemed 
to be high greenhouse gas emitters, then supervisors should 
take that into account and consider actions to channel credit 
and other financial services toward greener activities.
    My question is, will the Fed be introducing double 
materiality into its supervisory framework, and if so, how 
should or how will double materiality be defined?
    Mr. Gibson. Our perspective is single materiality, not 
double materiality.
    Mr. Ogles. Have there been instances where green global 
warming types of factors have channeled credit away from one 
business sector and towards others?
    Mr. Gibson. It is not the Federal Reserve's policy to 
discourage banking organizations from dealing with any law-
abiding business, so banks make their own decisions about which 
customers to deal with.
    Mr. Ogles. What about guidance from the Fed? Is there any 
guidance that would suggest that that is something that is on 
the horizon or could be on the horizon?
    Mr. Gibson. We have guidance around safety and soundness 
and making sure that banks are managing all of the material 
risks, and we have proposed guidance on climate-related 
financial risks.
    Mr. Ogles. But think about the wildfires in Canada and 
obviously, there are some who would point to global warming as 
the cause, but when you look at the news reports, they are not 
confident. Some of the fires may have been caused by lightning, 
but some of it may have been arson. Some of it may have been 
accidental. My concern is when we are kind of lumping into and 
defining global warming and other kind of ESG climate-type of 
jargon, we are ignoring the fact that lightning has been 
occurring for a while, and that wildfires have been occurring 
for a while, and that in areas where we are seeing some of that 
kind of devastation, we are building in areas that are already 
high-risk, right? So, it is not that the climate has changed 
more; it is that perhaps we are not managing the fires or the 
forests appropriately. So, I caution all the agencies, 
respectively, to not try to wordsmith or try to achieve an 
outcome based off of, quite frankly, natural phenomena that 
have been occurring.
    The Fed is asking financial institutions to prepare for 
possible future climate scenarios where there could be growing 
financial risk related to climate change. Would you agree a 
more relevant recent invisible risk would be delayed payments 
from the Treasury securities arising from a cyber-attack or 
other adversities? It would be easy to set up a scenario to 
analyze where there are, for whatever reasons, delayed payments 
as a potential risk to the financial sector. Has the Federal 
Reserve Board asked financial institutions to perform such 
scenarios?
    Mr. Gibson. Scenarios around delayed payments?
    Mr. Ogles. Sure. Say there is some sort of cyber-attack, 
what other scenarios might you give guidance that you would 
want to see in addition to climate risks?
    Mr. Gibson. We expect banks to be managing all the material 
risks, including cyber risk. We are doing a pilot climate 
scenario analysis focused specifically on climate-related 
financial risks, but we are also doing work in other areas, 
like cyber risk, to ensure that banks are managing those risks 
too. Yes, sir.
    Mr. Ogles. One of my concerns that I have had with, quite 
frankly, many of the alphabet agencies, is we have seen, under 
this Administration's agenda, that it has permeated the 
business community. It has been forced upon them, and I would 
argue that the Fed has been culpable in that agenda. Mr. 
Chairman, I am out of time, but I want to thank the panelists 
for being here. We are almost done. And again, Mr. Chairman, I 
yield back.
    Chairman Barr. The gentleman yields back. The gentleman 
from South Carolina, Mr. Norman, is recognized for 5 minutes.
    Mr. Norman. Thank you, Mr. Chairman. And I want to thank 
each of the panelists. I know forest fires have come up.
    Ms. Benatar, you mentioned, and I think one of my 
colleagues also mentioned the problem we have with forest 
fires, particularly in California. If you talk to any of the 
forest management team, what do they say the number-one calls, 
outside of lightning and outside of intentionally setting 
fires, the number-one cause is?
    Ms. Benatar. I see them daily, and they say it is arson.
    Mr. Norman. Okay, arson, but what is another?
    Ms. Benatar. For firefighters, we do lightning and arson, 
and that has been one of the primary causes of fires. And for 
us, it is growing significantly due to not addressing 
deforestation issues and not actually doing mitigation control 
to help stop fires from expanding in our communities.
    Mr. Norman. The number-one issue that they have, and we 
have a lot of natural areas and Federal lands in South 
Carolina, but you mentioned the activists. The thatch is 2 and 
3 feet that they will not let you take up, which is a tinder 
box for an arsonist. My question at one of the hearings was, do 
you believe trees have lives? In other words, they are 
beginning and ending because the activists I talk with will not 
let you cut it, thin the forest to let the sunlight in, let the 
air in. They just don't believe in that.
    And for the regulators to cap insurance companies because 
they can't insure, it is ludicrous. You all are in the 
regulatory industry. If you had to advise your banks on the 
risk, where would climate change rank? Mr. Ogles mentioned 
cybersecurity default. How would you rank climate change as a 
risk to the banks?
    Mr. Coleman. Thank you for that question. We don't 
specifically rank the risk, but as noted in our Semiannual Risk 
Perspective, we do highlight what we believe to be the most 
significant risks facing the institutions today. We highlighted 
four of those risks, including operational, compliance, credit, 
and liquidity, and within those risks, we highlighted specific 
things that could impact those risks.
    Mr. Norman. But how would you? If you had to just say your 
safety and soundness is your goal to monitor, when you gave 
them a synopsis of all the risks that the banks face, where 
would climate change rank, in your opinion?
    Mr. Coleman. I believe that is dependent upon the 
institution, and it is up the institution to define how 
climate-related financial risk could impact their financial 
stability.
    Mr. Norman. Okay. So, you have no opinion on, should they 
put that as a top priority, or a cyberattack, or a liquidity 
default? That doesn't come into play when you advise a bank on 
what could get them out of the safety and soundness realm, 
because I will tell you, according to Pew Research Center 
polling this year, climate change ranks 17th out of 21st on 
national issues with the average public. When you hear some of 
the ludicrous things that are being said--Al Gore is saying 
that the ocean is boiling. He has worked himself into a frenzy.
    I will tell you that what is bizarre now in this country is 
you have an Administration that is best friends with and 
cozying up to China, which is, I think, building coal plants 
every week. The CO2 emissions aren't too good. With the issues 
there, it baffles me that why they are pushing this so much.
    Second, I will say one of the things the Financial Services 
Committee, and I have talked to the chairman, I think needs to 
do is break down the dollars that are spent. Who is that going 
to? If you can affect a flood, if man can affect the wind, if 
man can affect a hurricane, where are these dollars? Break it 
on down like I do when I have a real estate project. Where is 
this money going? Would that help you all in evaluating risk to 
see what your return on your investment is?
    [No response.]
    Mr. Norman. Okay. I am getting blank stares, but I think 
that would give you some idea. When you find out who is doing 
what, when you find out where the money is going, I think it 
will tell you a whole lot. And for these who put this risk 
above everything, not only it is a disservice to the 
shareholders, but it is a disservice to this country. I yield 
back.
    Chairman Barr. The gentleman yields back. The gentlewoman 
from California, Mrs. Kim, is recognized for 5 minutes.
    Mrs. Kim. Thank you, Chairman Barr. I represent a district 
in Southern California that is very prone to wildfires because 
of the bad land management policies from Sacramento, droughts, 
and the impact of climate change. So, I share the concern of 
climate change, and I welcome opportunities to work together 
without raising costs for American firms and punishing small 
businesses with onerous climate disclosure requirements. We 
understand the Fed is now undertaking the climate scenario 
analysis exercise involving a mandate to six banks supervised 
by the Fed. Is the Fed thinking about expanding the pilot 
program beyond the six banks?
    Mr. Gibson. The pilot climate scenario analysis that we are 
doing this year only includes the six banks, and it will be 
finished around the end of the year, and then it will be 
concluded.
    Mrs. Kim. Yes. Vice Chair Barr has indicated that the 
findings of the climate scenario analysis will be made public 
through a report. Does the Fed have plans to incorporate some 
of what you are learning from the climate scenario analysis 
into the mandatory stress test using climate risk modeling?
    Mr. Gibson. The supervisory stress test that we do that 
feeds into banks' capital requirements is separate and distinct 
from the pilot climate scenario analysis exercise. Those are 
different things, and they don't feed into each other.
    Mrs. Kim. I want to reiterate that we should be careful to 
not venture out into additional mandates without first ensuring 
that our field supervisors are taking care of the bread-and-
butter issue like interest and operational risk. Silicon Valley 
Bank's failure is a clear case study of the negative outcomes 
because of the lack of focus on the supervisory framework.
    Mr. Gibson, how involved were you and other Fed staff in 
conducting this holistic review of the capital with Vice Chair 
Barr?
    Mr. Gibson. A number of Fed staff worked on projects and 
briefings for Vice Chair Barr as he was conducting his holistic 
capital review.
    Mrs. Kim. Who are?
    Mr. Gibson. Many of us.
    Mrs. Kim. When the holistic review was first announced in 
2022, it seemed that this review would be conducted by the Fed 
Board, but given the speech from last week, it seems to only be 
reflective of Vice Chair Barr's view. That is why I wanted to 
know how involved the rest of the Board was in undertaking that 
review, and do you foresee including climate risk as part of 
the holistic review process?
    Mr. Gibson. The holistic capital review was Vice Chair 
Barr's review, and it doesn't include the pilot climate 
scenario analysis that we are talking about here today.
    Mrs. Kim. Mr. Jones, let me move on to talk about some 
other issue. The National Credit Union Association's request 
for comment on climate-related financial risk, based on 
recommendations made by the Financial Stability Oversight 
Council or the interagency climate working group that the NCUA 
participates in, that is led by Treasury or another Executive 
Branch agency. Is that right?
    Mr. Jones. The NCUA Board did issue a request for 
information in April of this year.
    Mrs. Kim. The NCUA's request for comment on climate-related 
financial risk asked whether the NCUA should modify its 
examination procedures and supervisory posture in relation to 
the risk, including modifying CAMELS ratings. Could you explain 
what modifications to CAMELS ratings the NCUA has in mind, and 
if it wants to modify supervision and examination procedures to 
promote environmental regulations?
    Mr. Jones. The NCUA Board has not spoken to any changes. We 
asked about 38 questions in the request for information in 
order to solicit stakeholder feedback on their perspective and 
what opportunities may exist for credit unions, but nothing 
particular has been developed. It is really to openly solicit 
feedback.
    Mrs. Kim. Okay. You are continuing to have the 
conversation, and did you ask a follow-up question?
    Mr. Jones. There were a variety of questions that were 
posed really to try to better understand the physical risks and 
transition risks along with the business opportunities. The 
comment period closed on the 26th of June. We have 44 
respondents, and we have staff who are going through that right 
now.
    Mrs. Kim. Thank you. I yield back.
    Chairman Barr. The gentlelady yields back, and I would like 
to thank our witnesses for their testimony today. It has been 
very informative, and the testimony we have heard certainly, I 
am sorry to say, perpetuates concerns that regulators focused 
on climate-related financial risk will, in fact, politicize 
credit allocation, assurances notwithstanding.
    And, Dr. Gibson, your testimony was very professionally 
delivered, and I appreciate your service, but if climate 
scenario analysis is distinct from the capital framework, why 
are we doing it? We want to know where this is going. And your 
assurance that your increased focus on climate-related 
financial risk will not discourage lending by banks to legal 
businesses certainly looks to us, some of us, like a 
distinction without a difference, because when a regulator 
comes in and says, we are really focused on climate-related 
financial risk, that sends a message: Don't lend to carbon-
intensive industries. That is what we are concerned about, and 
to the extent it is not happening now, where is this going? We 
are going to continue to ask these questions going forward, and 
we urge you to heed the admonishment of the Chairman of the 
Federal Reserve.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    This hearing is now adjourned.
    [Whereupon, at 12:13 p.m., the hearing was adjourned.]

                            A P P E N D I X

                             July 18, 2023
                             
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