Yellen to convene financial watchdogs to discuss climate change, investment funds

Treasury Secretary Janet Yellen will convene an interagency panel of financial regulators to discuss climate change and how certain investment funds handled the onset of the COVID-19 pandemic.

The Treasury Department announced Wednesday that Yellen will lead the first meeting of the Financial Stability Oversight Council (FSOC) under the Biden administration next Tuesday. The virtual meeting will include a public discussion of climate-related financial risks before a closed session to discuss hedge funds and how mutual funds fared during the pandemic-driven market meltdown last year, the department said.

The FSOC was established by the 2010 Dodd-Frank financial reform law to help regulators identify and respond to threats to the financial system spanning their jurisdictions. Chaired by the Treasury secretary, FSOC can also subject financial firms to stricter oversight by labeling them systemically important financial institutions, or SIFIs.

The council also includes the chairs of the Federal Reserve Board, Securities and Exchange Commission, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation and National Credit Union Administration, as well as the director of the Consumer Financial Protection Bureau, the comptroller of the currency, the director of the Federal Housing Finance Agency and a Senate-confirmed member with insurance expertise.

Democratic lawmakers and Wall Street critics have pushed the Biden administration to flex its immense regulatory power, and the FSOC could play a significant role in Yellen’s goal of leading the fight against climate change.

Yellen has called climate change “an existential threat” to the world and told international allies that the Treasury’s approach to the issue would “change dramatically” from the Trump administration’s lack of attention.

Under Yellen, the FSOC could play a leading role in developing the “regulations necessary to assess and mitigate” climate-related financial risks she called for during her confirmation process. 

Yellen is also already under pressure to subject investment firms to tighter oversight using the FSOC, a longtime goal of progressives and financial sector critics.

During a Senate Banking Committee hearing Wednesday, Sen. Elizabeth Warren (D-Mass.) urged Yellen — a former chair of the Fed — to designate BlackRock as a SIFI before the next time financial markets buckle.

Yellen, however, said that FSOC would be more likely to focus on specific activities instead of the size of firms.