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illuminem summarises for you the essential news of the day. Read the full piece on CNBC or enjoy below:
🗞️ Driving the news: U.S. financial regulators have formally rescinded climate risk management guidelines that required banks to prepare for losses linked to climate-related events
• The Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) announced the rollback, arguing that existing risk frameworks are sufficient and that the guidance created confusion and compliance burdens
• The decision reverses rules introduced in 2023 and reflects a broader policy shift under the Trump administration
🔭 The context: The original climate risk principles aimed to align the banking sector with growing global concerns over climate-related financial risks, including physical impacts (e.g. hurricanes, wildfires) and transition risks (e.g. stranded assets)
• Critics, particularly from the current administration, have framed the rules as regulatory overreach
• The Fed’s new leadership under Governor Michelle Bowman views the rollback as a correction, stating that climate risk management exceeds the Fed’s core supervisory responsibilities
🌍 Why it matters for the planet: The removal of these requirements weakens one of the few mechanisms integrating climate risk into U.S. financial regulation
• Climate-related shocks are expected to intensify, and without structured scenario analysis or contingency planning, the financial system may be underprepared for their cascading effects
• The decision could widen the regulatory gap between the U.S. and jurisdictions like the EU, UK, and Japan, where central banks increasingly view climate risks as material to financial stability
⏭️ What's next: While formal supervision on climate risk has been dropped, individual banks may continue integrating climate scenarios voluntarily — particularly those with global operations
• Some U.S. states and international investors are expected to increase pressure on financial institutions to maintain climate disclosures and risk planning
• Political dynamics heading into the 2026 election cycle will determine whether climate finance regulation remains sidelined or returns to the agenda
💬 One quote: “Rescinding the principles is shortsighted and will make the financial system riskier even as climate-related financial risks grow.” – Michael Barr, former Fed Vice Chair for Supervision
📈 One stat: Climate-related risks are estimated to cost the global economy $1.7 trillion annually by 2025, according to the UN Office for Disaster Risk Reduction
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