Dive Brief:

• The Office of the Comptroller of Currency will no longer provide large financial institutions guidance on climate-related financial risk, the regulator announced Monday.
• “The principles providing guidance to banks for climate-related financial risk are overly burdensome and duplicative,” Acting Comptroller of the Currency Rodney Hood said in a statement. “The OCC’s existing guidance for banks to maintain a sound risk management framework applies to all activities conducted by supervised institutions and includes potential exposures to severe weather events or natural disasters.”
• The OCC established the guidance in collaboration with the Federal Reserve and the Federal Deposit Insurance Corp. in October 2023. The principles sought to help financial institutions with more than $100 billion in total assets to identify and manage climate-related financial risks. The guidance is no longer available on the OCC’s website as of March 31.

Dive Insight:

The OCC’s decision to withdraw the guidance on managing climate-related risks comes almost a month after the agency announced it was leaving the Network of Central Banks and Supervisors for Greening the Financial System. The OCC’s exit followed other federal agencies leaving the global coalition that aims to mobilize green finance and develop recommendations for climate-risk management in the financial sector. The Fed, FDIC and the Treasury Department also left NGFS around the time President Donald Trump retook office.

The decision is also in line with Trump’s agenda to reverse course on the nation’s federal climate policies that began in earnest on his first day. Shortly after his inauguration, Trump signed a flurry of climate-related executive orders that withdrew the U.S. from the Paris Agreement, again; declared a national “energy emergency;” paused all wind power development; and suspended all funding disbursements related to the Inflation Reduction Act and the Bipartisan Infrastructure Law.

The OCC’s principles — captured by web archive Wayback Machine — aimed to provide banks with a “high-level framework for climate-related financial risk management consistent with the agencies’ existing rules and guidance” and support banks in maintaining a focus on key aspects of such risk management, the agency said when it unveiled the guidance.

Several climate and environmental advocates lambasted the agency’s move to withdraw the principles, including Elyse Schupak, a policy advocate at Public Citizen’s Climate Program, who called it “deeply irresponsible.”

“Failing to measure risks in the banking system, such as those from climate change, won’t make those risks go away,” Schupak said in emailed comments to ESG Dive. “Instead, it will make risks to individual banks more difficult to assess and mitigate and, in turn, create vulnerabilities in the broader financial system.” 

Jessica Garcia, a senior policy analyst for climate finance at Americans for Financial Reform Education Fund echoed this, adding the agency — which is responsible for regulating and supervising national banks and federal savings associations — is “undermining legitimate efforts to understand how climate change creates compounding and concurrent risks for institutions and for the financial system, which may lead to a crisis.”

Hood is a former National Credit Union Administration chair who became acting comptroller in February. Hood said Monday that he would “continue to look for appropriate opportunities to calibrate regulatory requirements to be effective, not excessive, while ensuring the safety, soundness and fairness of the federal banking system.”