Senate Dems want answers on how GSEs are preparing for climate change
WASHINGTON — Senate Democrats are again sounding off on climate change’s risk to the global financial system, this time asking how Freddie Mac and Fannie Mae factor extreme weather into their risk modeling.
Six Democratic senators inquired about the government-sponsored enterprises’ climate change preparedness in separate letters Monday, including Sens. Sherrod Brown of Ohio, Sheldon Whitehouse of Rhode Island, Brian Schatz of Hawaii, Chris Van Hollen of Maryland, Jeanne Shaheen of New Hampshire and Martin Heinrich of New Mexico.
In both letters, the senators wrote that it was critical that Fannie Mae and Freddie Mac were “prepared for these increasing risks so [they] can continue fulfilling [their] congressionally directed mission to facilitate access to homeownership throughout the nation and [their] statutory obligations to serve underserved markets and low- and moderate-income homebuyers and renters.”
“Climate change poses significant risks to communities, households and to the global economy,” the senators continued. “If we are unprepared, climate change could have particularly devastating impacts on the individuals and communities who can least afford it.”
In the letters, the senators asked the GSEs to summarize the internal research each company had undertaken to assess the potential effects of climate change on their business. They also requested information on how each entity currently factors extreme weather into their risk modeling and what kinds of insurance each entity uses to mitigate potential harm from it.
The letter also cited research from the Federal Reserve Bank of San Francisco, which reported last October that “low- and moderate-income (LMI) communities will likely be disproportionately affected by climate change-related events." Given the GSEs' duty to ensure affordable housing, the senators asked if organizations were considering “efforts to mitigate climate-related hazards for low- and moderate-income families as part of its Duty to Serve or otherwise.”
Monday’s letter is the first time Senate Democrats have asked GSEs about their climate preparedness, but they have pushed other parts of the financial system to take climate risk more seriously.
Last January, a group of 20 senators asked federal bank regulators to consider climate change in their supervision. In November, the Senate introduced the Climate Change Financial Risk Act, which would require the Federal Reserve to develop climate-related stress tests for banks.