Addressing Climate as a Systemic Risk: The Need to Build Resilience Within Our Banking and Financial System, House hearing transcript (June 30, 2021), GovInfo CHRG-117hhrg45383, PDF
Summary
This is the transcript of a June 30, 2021 hybrid hearing of the Subcommittee on Consumer Protection and Financial Institutions of the House Committee on Financial Services on climate change as a systemic risk to banks and the financial system. The witnesses were Hilary J. Allen of American University Washington College of Law, Rachel Cleetus of the Union of Concerned Scientists, Mayra Rodriguez Valladares of MRV Associates, Clifford V. Rossi of the University of Maryland and Steven Rothstein of the Ceres Accelerator for Sustainable Capital Markets. Chairman Perlmutter opened by comparing climate risk with the 2008 housing bubble. Perlmutter said that in 2020 more than 58,000 wildfires burned 10.1 million acres and caused $20 billion in damages.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
ADDRESSING CLIMATE AS A
SYSTEMIC RISK: THE NEED TO
BUILD RESILIENCE WITHIN OUR
BANKING AND FINANCIAL SYSTEM
HYBRID HEARING
BEFORE THE
SUBCOMMITTEE ON CONSUMER PROTECTION
AND FINANCIAL INSTITUTIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
JUNE 30, 2021
Printed for the use of the Committee on Financial Services
Serial No. 117–36
(
U.S. GOVERNMENT PUBLISHING OFFICE
45–383 PDF WASHINGTON : 2021
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 K:\DOCS\HBA181.150 TERRI
HOUSE COMMITTEE ON FINANCIAL SERVICES
MAXINE WATERS, California, Chairwoman
CAROLYN B. MALONEY, New York PATRICK MCHENRY, North Carolina,
NYDIA M. VELÁZQUEZ, New York Ranking Member
BRAD SHERMAN, California FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York PETE SESSIONS, Texas
DAVID SCOTT, Georgia BILL POSEY, Florida
AL GREEN, Texas BLAINE LUETKEMEYER, Missouri
EMANUEL CLEAVER, Missouri BILL HUIZENGA, Michigan
ED PERLMUTTER, Colorado ANN WAGNER, Missouri
JIM A. HIMES, Connecticut ANDY BARR, Kentucky
BILL FOSTER, Illinois ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio FRENCH HILL, Arkansas
JUAN VARGAS, California TOM EMMER, Minnesota
JOSH GOTTHEIMER, New Jersey LEE M. ZELDIN, New York
VICENTE GONZALEZ, Texas BARRY LOUDERMILK, Georgia
AL LAWSON, Florida ALEXANDER X. MOONEY, West Virginia
MICHAEL SAN NICOLAS, Guam WARREN DAVIDSON, Ohio
CINDY AXNE, Iowa TED BUDD, North Carolina
SEAN CASTEN, Illinois DAVID KUSTOFF, Tennessee
AYANNA PRESSLEY, Massachusetts TREY HOLLINGSWORTH, Indiana
RITCHIE TORRES, New York ANTHONY GONZALEZ, Ohio
STEPHEN F. LYNCH, Massachusetts JOHN ROSE, Tennessee
ALMA ADAMS, North Carolina BRYAN STEIL, Wisconsin
RASHIDA TLAIB, Michigan LANCE GOODEN, Texas
MADELEINE DEAN, Pennsylvania WILLIAM TIMMONS, South Carolina
ALEXANDRIA OCASIO-CORTEZ, New York VAN TAYLOR, Texas
JESÚS ‘‘CHUY’’ GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts
CHARLA OUERTATANI, Staff Director
(II)
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 K:\DOCS\HBA181.150 TERRI
SUBCOMMITTEE ON CONSUMER PROTECTION AND FINANCIAL INSTITUTIONS
ED PERLMUTTER, Colorado, Chairman
GREGORY W. MEEKS, New York BLAINE LUETKEMEYER, Missouri, Ranking
DAVID SCOTT, Georgia Member
NYDIA M. VELÁZQUEZ, New York FRANK D. LUCAS, Oklahoma
BRAD SHERMAN, California BILL POSEY, Florida
AL GREEN, Texas ANDY BARR, Kentucky
BILL FOSTER, Illinois ROGER WILLIAMS, Texas
JUAN VARGAS, California BARRY LOUDERMILK, Georgia
AL LAWSON, Florida TED BUDD, North Carolina
MICHAEL SAN NICOLAS, Guam DAVID KUSTOFF, Tennessee, Vice Ranking
SEAN CASTEN, Illinois Member
AYANNA PRESSLEY, Massachusetts JOHN ROSE, Tennessee
RITCHIE TORRES, New York WILLIAM TIMMONS, South Carolina
(III)
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 K:\DOCS\HBA181.150 TERRI
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 K:\DOCS\HBA181.150 TERRI
CONTENTS
Page
Hearing held on:
June 30, 2021 .................................................................................................... 1
Appendix:
June 30, 2021 .................................................................................................... 31
WITNESSES
WEDNESDAY, JUNE 30, 2021
Allen, Hilary J., Associate Professor of Law, American University Washington
College of Law ...................................................................................................... 6
Cleetus, Rachel, Policy Director, Union of Concerned Scientists ........................ 7
Rodriguez Valladares, Mayra, Managing Principal, MRV Associates ................. 9
Rossi, Clifford V., Executive-in-Residence and Professor-of-the-Practice, Rob-
ert H. Smith School of Business, University of Maryland ................................ 13
Rothstein, Steven, Managing Director, Ceres Accelerator for Sustainable Cap-
ital Markets .......................................................................................................... 11
APPENDIX
Prepared statements:
Allen, Hilary J. ................................................................................................. 32
Cleetus, Rachel ................................................................................................. 52
Rodriguez Valladares, Mayra .......................................................................... 66
Rossi, Clifford V. ............................................................................................... 95
Rothstein, Steven .............................................................................................. 104
ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD
Perlmutter, Hon. Ed:
CoreLogic 2020 Climate Change Catastrophe Report ................................... 139
(V)
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00005 Fmt 5904 Sfmt 5904 K:\DOCS\HBA181.150 TERRI
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00006 Fmt 5904 Sfmt 5904 K:\DOCS\HBA181.150 TERRI
ADDRESSING CLIMATE AS A
SYSTEMIC RISK: THE NEED TO
BUILD RESILIENCE WITHIN OUR
BANKING AND FINANCIAL SYSTEM
Wednesday, June 30, 2021
U.S. HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON CONSUMER PROTECTION
AND FINANCIAL INSTITUTIONS,
COMMITTEE ON FINANCIAL SERVICES,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:01 p.m., in room
2128, Rayburn House Office Building, Hon. Ed Perlmutter [chair-
man of the subcommittee] presiding.
Members present: Representatives Perlmutter, Foster, Vargas,
Lawson, Casten; Luetkemeyer, Lucas, Posey, Barr, Loudermilk,
Kustoff, and Timmons.
Ex officio present: Representatives Waters and McHenry.
Chairman PERLMUTTER. The Subcommittee on Consumer Protec-
tion and Financial Institutions will come to order.
Without objection, the Chair is authorized to declare a recess of
the subcommittee at any time. Also, without objection, members of
the full Financial Services Committee who are not members of this
subcommittee are authorized to participate in today’s hearing.
With the hybrid format of this hearing, we have some Members
and witnesses participating in person, and others on the Webex
platform.
I would like to remind all Members participating remotely to
keep themselves muted when they are not being recognized by the
Chair. The staff has been instructed not to mute Members except
when a Member is not being recognized by the Chair, and there is
inadvertent background noise.
Members are also reminded that they may only participate in
one remote proceeding at a time. If you are participating remotely
today, please keep your camera on, and if you choose to attend a
different remote proceeding, please turn your camera off.
Today’s hearing is entitled, ‘‘Addressing Climate as a Systemic
Risk: The Need to Build Resilience Within Our Banking and Finan-
cial System.’’
I now recognize myself for 4 minutes to give an opening state-
ment.
In 2008, the housing bubble collapse and financial crisis caught
many experts, investors, and policymakers off guard, and the re-
(1)
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
2
sulting Great Recession devastated communities across the coun-
try.
When threats to financial stability are not properly valued and
mitigated, the consequences can be severe and longstanding: 2020
tied 2016 as the hottest year on record, and the 7 hottest years re-
corded have all occurred since 2014. In 2020 alone, more than
58,000 wildfires burned 10.1 million acres and caused $20 billion
in damages.
In my home State of Colorado, in addition to more severe and
frequent wildfires, we are seeing less annual snowpack, more water
scarcity and droughts, and more heat waves. These changes pose
long-term risks for Colorado’s agriculture, tourism, and housing in-
dustries.
Whether it is rising sea levels threatening coastal communities,
more severe hurricanes on the East and Gulf Coasts, wildfires in
the West, or regional climate changes affecting crop yields on the
plains, climate change is affecting every State and community in
our nation.
These risks are intertwined with the financial system. Insurers
can expect more claims related to extreme weather events, lenders
will see more risks in underwriting carbon-dependent industries,
and economic changes will affect asset values across many sectors.
Climate change is creating significant and complex risks in our fi-
nancial system that we cannot ignore.
Last month, President Biden signed an Executive Order directing
the National Economic Council, the Treasury Department, and the
Office of Management and Budget to develop a government-wide
strategy for evaluating and addressing climate-related financial
risk and assessing the necessary financing to achieve net-zero
emissions by 2050.
Several of the financial regulators have already begun work to
understand climate risk. We can either work together in Congress
and across the government to coordinate sensible policies to evalu-
ate and mitigate financial risk related to climate, and help our
economy transition to a carbon-neutral future, or we can wait until
the market and the consequences of climate change dictate such ac-
tions for us.
Last week, I reintroduced the Green Neighborhoods Act, a bill
aimed at making the housing sector more energy-efficient, and en-
suring that workers can get trained for green jobs. This is one ex-
ample of how Congress can help facilitate an orderly transition of
our economy and make the housing sector greener.
The canary in the coal mine has stopped singing. We must act
now to ensure our financial system is resilient in the face of cli-
mate change and the economic transition.
Today’s hearing will examine physical and transition risks posed
by climate change and how financial regulators can work to evalu-
ate and mitigate these risks. I look forward to our discussion today,
so we can ensure that our financial system is ready for what is
coming.
With that, I now recognize the ranking member of the sub-
committee, Mr. Luetkemeyer from Missouri, for 4 minutes for an
opening statement.
Mr. LUETKEMEYER. Thank you, Mr. Chairman.
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
3
Climate risk has certainly been a buzzword, both within the
banking industry and within the Biden Administration. The Ad-
ministration has issued multiple Executive Orders focused on cli-
mate risk, specifically an Executive Order titled, ‘‘Climate-Related
Financial Risk,’’ which requires the Financial Stability Oversight
Council (FSOC) to assess climate-related financial risk to the sta-
bility of the Federal Government and the stability of the financial
system.
Within the Administration, the Federal Reserve has been the
most active regulator in this space. In May, they announced the es-
tablishment of the Financial Stability Climate Committee to iden-
tify, assess, and address climate-related risk. Furthermore, the
Federal Reserve has requested information from lenders on how
they handle climate risk at their institutions.
Let me be clear: Federal regulators should understand how fi-
nancial institutions are handling risk mitigation in their lending
portfolio. This includes numerous types of risk, including credit
risk, concentration risk, and default risk.
However, the inclusion of climate-related financial risk must be
better understood by both regulators and financial institutions be-
fore any framework around this risk can be initiated.
It is clear that certain financial institutions, particularly the
largest U.S. firms, are including climate risk in their risk-assess-
ment processes. The U.S. global systemically important banks (G-
SIBs) have all limited their approach to carbon financing in one
way or another. Some have pledged to provide investments in sus-
tainable businesses and technologies, and others have pledged to
reach net-zero greenhouse gas emissions in their financial activities
by a certain year.
As the economy and consumer demands change, it is appropriate
for financial institutions to change as well. Ensuring your lending
and investment portfolio is diversified and risk-averse is a core
tenet of risk management.
However, as financial institutions move in the direction of sus-
tainable investment, it is appropriate to determine if the U.S. econ-
omy, in particular the energy industry, is ready to move away from
fossil fuels and carbon-intensive energy.
Will the energy sector be choked off from financial services that
they need to exist? What are the costs of the transition risks to the
U.S. economy?
These are questions that must be seriously considered and un-
derstood before an industry-wide stance is taken regarding invest-
ments in carbon-intensive industries.
While Federal regulators should understand these risks, I must
associate myself with the comments of Federal Reserve Vice Chair-
man of Supervision Randal Quarles, who said, ‘‘Broad climate pol-
icy is the role of Congress and other Federal agencies, not the Fed-
eral Reserve.’’
Congress should not deputize the financial services industry to
be the climate police, greenlighting sustainable projects and shut-
ting down legally-operating businesses that are carbon-intensive,
especially when they have no understanding of how climate risks
will impact the economy and do not have sufficient data and mod-
eling to determine these impacts.
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
4
The Comprehensive Capital Analysis and Review (CCAR) stress
testing amongst financial institutions looks 9 quarters into the fu-
ture. Most climate change models look about 30 to 100 years into
the future. If we go down the path of forcing institutions to specu-
late on future risk, and tying their capital requirements to this risk
before we have an appropriate understanding of the economic im-
pacts and the effect on access to credit and the ability of the energy
sector to pivot to new technologies, we could do irreparable harm
to our economy.
And yet, that is exactly what my colleagues on the other side of
the aisle are proposing. They have noticed legislation in this hear-
ing that would directly tie climate-related risks to bank capital by
increasing the risk weighting of assets financing greenhouse gas
(GHG) emissions.
This is an extremely irresponsible proposal. Again, we have no
understanding of how this would impact the economy, no real data
on how this would impact the world’s climate, no clear information
on how we can accurately predict climate-related financial risk, and
no clear understanding of how transition risks could impact the
safety and soundness of financial institutions and the U.S. economy
at large.
I look forward to bringing up these concerns with the panelists
today.
And with that, Mr. Chairman, I yield back.
Chairman PERLMUTTER. The gentleman yields back.
The Chair of the full Financial Services Committee, the gentle-
woman from California, Chairwoman Waters, is now recognized for
1 minute.
Chairwoman WATERS. Thank you, Chairman Perlmutter.
Over the past year, we have witnessed examples of how climate
change can disrupt our financial system. The financial toll, includ-
ing insurance losses from the most devastating wildfire seasons on
record, grew so sharply that our Governor in California had to
issue a moratorium to prevent insurers from denying insurance
coverage to homeowners.
Meanwhile, the hundreds of bankruptcies in the oil and gas sec-
tor as a result of the economic fallout from COVID-19 have pro-
vided a preview of the type of pain our economy will likely face as
climate change becomes worse.
I am pleased that President Biden, Treasury Secretary Yellen,
and policymakers at the Fed and elsewhere have listened to those
of us who have raised concerns about the urgent financial stability
risk of climate change and that they are beginning to take action.
So, I am looking forward to the hearing today. And I assure you,
Chairman Perlmutter, that we are going to be hearing from Seattle
and Portland. Portland was 116 degrees as of yesterday, and Se-
attle was 104 as of Sunday. And I don’t know what financial dis-
ruption this is going to cause, but climate change is real.
I yield back the balance of my time.
Chairman PERLMUTTER. The gentlelady yields back.
The ranking member of the Full Committee, the gentleman from
North Carolina, Ranking Member McHenry, is recognized for 1
minute.
Mr. MCHENRY. Thank you, Chairman Perlmutter.
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
5
You have heard me say this before, and I have said it repeatedly:
Climate change is real. But instead of taking the time to get this
legislation right, my Democrat colleagues are once again rushing to
legislate to appease the progressive left.
Usurious policies will have far-reaching and unintended harmful
consequences. Just as with the so-called Climate Crisis Financial
Stability Act, without doing any work, without listening to any ex-
perts, without any data, the Democrats want to take the step of de-
termining risks for financial institutions and punishing certain in-
stitutions with a capital surcharge.
Now, not only is this unrealistic, I think it is a dangerous step.
We need to make sure that any next step strengthens the resil-
iency of the system and seriously addresses climate risk, not ap-
peases some progressive stakeholder group.
I yield back.
Chairman PERLMUTTER. The gentleman yields back.
And I would just like to alert the Members and the panelists that
we are expecting votes probably around 3:00, and what I would like
to do is get through the statements of all of the witnesses as much
as we can before we have to take a break for those votes. And if
we can get some questioning in before the votes are called, we will
do that. Otherwise, we will recess until we finish the votes on the
Floor, and then we will reconvene once the votes are finished.
With that, we will turn to our witnesses.
Professor Hilary Allen is an associate professor of law at Amer-
ican University. Professor Allen’s research is focused on domestic
and international financial stability regulation, and she teaches
classes in banking law, securities regulation, financial regulation,
and other topics.
Dr. Rachel Cleetus is a policy director with the Union of Con-
cerned Scientists. Dr. Cleetus is an economist with 20 years of ex-
perience working on climate and clean energy policies and is an ex-
pert on the United Nations Framework Convention on Climate
Change process.
Ms. Mayra Rodriguez Valladares is the managing principal with
MRV Associates. Ms. Rodriguez Valladares is an independent con-
sultant who has advised central banks, insurers, regulators, and fi-
nancial services firms on risk and compliance issues.
Mr. Steven Rothstein is the managing director of Ceres Accel-
erator for Sustainable Capital Markets. Mr. Rothstein’s work at
Ceres Accelerator is focused on transforming practices governing
capital markets to reduce the financial impacts of the climate cri-
sis.
And Dr. Clifford Rossi is the executive-in-residence and professor
of the practice at the Robert H. Smith School of Business, Univer-
sity of Maryland. Dr. Rossi has almost 25 years of experience in
government and financial services and has held senior roles in risk
management at several of the largest financial services companies.
Our witnesses are reminded that their oral testimony will be lim-
ited to 5 minutes. You should be able to see a timer on your screen
or on your desk in front of you that will indicate how much time
you have left. When you have 1 minute remaining, a yellow light
will appear. I would ask that you be mindful of the timer, and
when the light appears, wrap up your testimony so that we can be
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
6
respectful of both the other witnesses’ and the subcommittee mem-
bers’ time.
And without objection, your written statements will be made a
part of the record.
Professor Allen, you are now recognized for 5 minutes to give an
oral presentation of your testimony.
STATEMENT OF HILARY J. ALLEN, ASSOCIATE PROFESSOR OF
LAW, AMERICAN UNIVERSITY WASHINGTON COLLEGE OF LAW
Ms. ALLEN. Thank you, Chairman Perlmutter. Thank you, also,
Chairwoman Waters, Ranking Member McHenry, and Ranking
Member Luetkemeyer. And thank you, members of the sub-
committee.
I very much appreciate the opportunity to testify at today’s hear-
ing. As Chairman Perlmutter already mentioned, my name is
Hilary Allen, and I am an associate professor at the American Uni-
versity Washington College of Law. I teach classes in corporate law
and financial regulation, and my research focuses on financial sta-
bility regulation.
Prior to entering academia, I spent 7 years working in the finan-
cial services groups of prominent law firms in London, Sydney, and
New York, and in 2010, I worked with the Financial Crisis Inquiry
Commission, which was appointed by Congress to study the causes
of the financial crisis of 2008.
The views I am expressing today are entirely my own. They do
not represent American University or any other institution.
In my testimony today, I would like to highlight three points for
the committee.
First, I will underline the stakes involved in preparing the finan-
cial system for the physical and transitional risks associated with
climate change. The impacts of a financial crisis can be irreversible
and catastrophic, particularly for the most vulnerable members of
society, so financial regulators should take steps to make the finan-
cial system more robust to the climate-related uncertainty that we
face.
Second, I would like to advocate for increased focus on the poten-
tial systemic effects of operational problems arising from extreme
weather events and other environmental changes, because financial
stability regulation often neglects these operational risks.
Finally, I will speak about reforming the Office of Financial Re-
search, known as the OFR.
All of the Federal financial regulatory agencies need to be in-
volved in making this financial system more robust to climate-re-
lated threats, but the OFR can play a unique and crucial part in
that effort if it is rebuilt as an interdisciplinary hub of the different
kinds of expertise needed to assess and respond to these threats.
It has never been good policy to just let financial crises happen
and then clean up afterwards. Even with the Herculean and imagi-
native crisis response efforts that we saw from the Federal Reserve
and other governmental bodies in the wake of the financial crisis
of 2008, the economic fallout of that crisis could not be fully con-
tained. Many of the most vulnerable members of our society still
have not recovered from it.
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
7
I therefore urge the committee to take a precautionary approach
to financial stability regulation in general and, in particular, to-
wards climate-related risks.
A precautionary approach requires us to be creative in our think-
ing about risks to financial stability and favors bold, simple re-
sponses where possible.
I have outlined a number of responses in my written statement
that are designed to help manage the uncertainty about the precise
physical and transitional risks we face, including regulatory capital
requirements that require banks to fund themselves with more
common equity to act as a buffer against uncertainty and help pre-
vent financial institution failures and asset fire sales.
One reform that I want to stress for the committee today is the
need for what I call macro-operational regulation, which takes seri-
ously the possible systemic consequences of the steps taken by indi-
vidual financial institutions to manage their own operational risks.
For example, a financial institution that finds part of its physical
infrastructure damaged could shift its operations to alternative in-
frastructure. That would be a rational step by the institution, de-
signed to enable it to keep providing financial services. But if that
alternative infrastructure is overloaded as a result, that may create
problems for other financial institutions that also rely on the alter-
native infrastructure.
Different kinds of experts are needed to help think creatively
about the types of threats that climate change poses for the finan-
cial system. In the case of the operational risk spillovers that I just
mentioned, complex science expertise would be very helpful.
Climate scientists and environmental economists will obviously
be crucial to the effort. Data scientists and software engineers
would also make important contributions.
The Office of Financial Research should be the new home for
these types of interdisciplinary personnel, because consolidating
interdisciplinary expertise in one agency can create virtuous cycles
that make hiring easier and promote collaboration and consistency
in responding to new threats.
In my written testimony, I set out proposals for rebuilding the
OFR as an interdisciplinary expertise hub. Many of these proposals
relate to staffing and to the OFR’s relationship with other financial
regulatory bodies, particularly the Financial Stability Oversight
Council (FSOC).
I urge the committee to pursue these proposals as a matter of ur-
gency in order to ensure that our financial regulatory architecture
is equipped to deal with the challenges of climate change.
Thank you.
[The prepared statement of Professor Allen can be found on page
32 of the appendix.]
Chairman PERLMUTTER. Thank you for your testimony.
Now, I would like to recognize Dr. Rachel Cleetus for 5 minutes
for her testimony.
STATEMENT OF RACHEL CLEETUS, POLICY DIRECTOR, UNION
OF CONCERNED SCIENTISTS
Ms. CLEETUS. Thank you very much, Chairman Perlmutter,
Ranking Member Luetkemeyer, and members of the subcommittee,
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
8
for providing me the opportunity to testify remotely here today on
the systemic risks of climate change. My name is Rachel Cleetus,
and I am the policy director for the climate and energy program
at the Union of Concerned Scientists.
Summer has barely begun and we are already in the midst of a
stunning drought in much of the Western United States. Record-
setting heatwaves are underway, including an unprecedented one
in the Pacific Northwest. The Midwest has been hit by heavy rain
and flash flooding. The wildfire season is underway, another in-
tense one. We are projected to have an above-normal hurricane sea-
son.
Meanwhile, the COVID-19 pandemic and the economic crisis con-
tinue to be a threat.
What we are experiencing this summer is part of a very sobering
trend. In addition to steadily rising temperatures, climate change
is also driving accelerating sea level rise and ocean acidification.
Many sectors of the economy are at risk.
Our infrastructure, agriculture, fisheries, insurance, real estate,
tourism, and the impact on the health and safety of people, includ-
ing outdoor workers, is very significant, too.
Our nation experienced $22 billion-plus extreme weather and cli-
mate-related disasters last year. Climate-related infrastructure dis-
ruptions are increasing. Our roads, bridges, rail lines, and air trav-
el are all at risk.
The electricity system which underpins our daily lives has re-
peatedly failed. Heat waves put enormous pressure on the power
grid right at a time when we need power for cooling. We get power
outages, as we are seeing in the Northwest right now, which can
trigger cascading effects, including business interruptions and loss
of critical services that depend on electricity.
Meanwhile, heat-trapping emissions that fuel climate change are
still rising. The science is clear: We need to cut emissions by half
in 2030 and get to net zero no later than 2050.
And yet, today our economic and financial systems are not ac-
counting for these risks, nor are they helping drive a rapid shift to
a net-zero economy.
A combination of shortsightedness, inadequate policies, the out-
sized power of fossil fuel companies, and business-as-usual inertia
is getting in the way.
And if we fail to take action now, the potential for severe shocks
to our financial system will grow. And as with previous crises, the
impacts will be especially harsh for those who can least afford it—
low-income households, communities of color.
Instead, we have an opportunity now to ensure that our economy
and financial system are put on a path to be fairer, more climate-
resilient, and compatible with a low-carbon future.
We need a coordinated, comprehensive approach from the na-
tional to the international, the local level, with Congress, financial
regulators, and the Federal Government all playing their part.
We need mandatory risk disclosure in the marketplace to help
correct market failures. Fossil fuel companies and their investors
who bear an outsized responsibility for climate change must face
market pressures to change their business model and lending prac-
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
9
tices. We need transparent, uniform disclosure of market risks
from climate change based on the best available science.
Congress must pass legislation to set up an advisory committee
on climate risk in the FSOC, require climate risk disclosure in the
marketplace, and take steps to prioritize the well-being of
marginalized communities.
Much more is at stake than the fiscal well-being of U.S. busi-
nesses. The public relies on these companies to grow and manage
our savings, investments, pension funds, and energy choices. Our
market rules and financial safeguards must help develop the out-
comes we need to protect our health, welfare, and prosperity, not
simply the profits for the powerful and elite few.
We need a transformative climate strategy that addresses under-
lying systemic challenges, like structural racism and social-eco-
nomic inequities. We have urgent choices before us.
But because it is our actions that are the source of heat-trapping
emissions, here in one of the most powerful economies in the world,
we can also help set the rules of the market. We cannot have a
healthy economy if the planet is on fire and vast areas are under
water.
Thank you for this opportunity to testify today, and for your ef-
forts to protect our financial system from climate risk and to en-
sure that it helps contribute to the climate solutions we so urgently
need.
[The prepared statement of Dr. Cleetus can be found on page 52
of the appendix.]
Chairman PERLMUTTER. Thank you, Dr. Cleetus, for your testi-
mony.
Ms. Rodriguez Valladares, you are now recognized for 5 minutes
to give an oral presentation of your testimony.
STATEMENT OF MAYRA RODRIGUEZ VALLADARES, MANAGING
PRINCIPAL, MRV ASSOCIATES
Ms. RODRIGUEZ VALLADARES. Chairman Perlmutter, Ranking
Member Luetkemeyer, and distinguished members of the sub-
committee, thank you for the opportunity to appear before you.
I am Mayra Rodriguez Valladares, managing partner of MRV As-
sociates. For over 3 decades, I have worked with bankers and fi-
nancial regulators in over 30 countries on a wide range of risks
that can threaten financial institutions’ safety and soundness.
Unlike the global financial crisis, scientists have been warning
us for decades about the danger of climate change. Through the nu-
merous financial crises I have endured, I have learned that when
someone tells me this time it is going to be different, it is a warn-
ing signal that urgent action is critical now to avoid another pain-
ful crisis.
U.S. global systemically important banks are very exposed to cli-
mate risks. Not only do they provide financial services in States
vulnerable to intensifying climate events, they have operations in
foreign countries such as the UK, Japan, Canada, and Mexico,
which are exposed to physical and transition risks.
Regional, community, and agricultural banks are also exposed to
climate change. In 2019, severe flooding in the Midwest brought
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
10
loan defaults and payment challenges to their highest levels in 20
years.
Banks in areas that serve people of color are also vulnerable to
climate change since many of them are also in areas with a myriad
of environmental, infrastructure, and housing challenges.
I must note that the very significant rise in corporate leverage
in the United States in the last 2 decades means that those compa-
nies are the most likely to default in the event that they are af-
fected by climate change.
Market investors have not priced in climate change risks because
financial institutions and corporations are not required to identify,
measure, control, and monitor their climate-related risks and to
disclose them to the public.
Opacity in the financial system is dangerous to investors and or-
dinary Americans.
Given its membership of leading international standard-setting
bodies, such as the Financial Stability Board and the Basel Com-
mittee on Banking Supervision, U.S. regulators already work on
climate change risk frameworks.
In the U.S., the Financial Stability Oversight Council and its Of-
fice of Financial Research should be given the necessary human,
data, and technological resources so they can analyze how climate
change is impacting the entire financial system and to detect
sources of systemic risk.
Inaction is costly.
FSOC and OFR should focus on non-banks that are exposed to
climate-related risks. They are interconnected to banks, do not
have strong management requirements, and are very opaque.
Under Basel III, Pillar 1, bank regulators can require banks to
model operational risk, which includes natural disasters that can
hurt a bank’s assets, both in the banking and trading portfolios.
Under Pillar 2, banks can incorporate different risks, including
climate change-induced defaults or market volatility, into their In-
ternal Capital Adequacy Assessment Processes to determine eco-
nomic capital levels to sustain unexpected losses.
I respectfully recommend that financial regulators, especially the
Federal Reserve, the OCC, and the FDIC, recommend to them that
they should: one, create climate change stress tests or add climate
change scenarios to existing supervisory exercises, such as the
Comprehensive Capital Analysis Review and Dodd-Frank Stress
Test; two, design specific climate change supervisory guidance for
banks; three, update supervisory bank examination manuals to in-
clude how climate change impacts banks; four, conduct a review of
the human resources to determine if they have enough profes-
sionals with knowledge about climate science, risk data aggrega-
tion, and modeling; five, review if they have robust technological
systems to analyze climate change data and its impact on banks’
risks; and six, address their climate change data gaps.
I also recommend that bank regulators require banks to: one,
conduct a gap analysis to determine what resources they need to
improve risk data aggregation, climate change risk modeling, and
technology; two, incorporate physical and transition risks into their
enterprise-wide risk management frameworks and long-term finan-
cial plans to measure their climate risk exposures; three, include
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
11
in their bank recovery and resolution plans and their comprehen-
sive liquidity assessment reviews how physical and transition risks
impact banks’ funding, cost of borrowing, liquidity, and risk mitiga-
tion ability; and, lastly, disclose to the public climate change model
results, including tail risks, via Basel III’s Pillar 3 disclosures.
I look forward to your questions, and I would be pleased to serve
as a resource to you in the future as you continue to explore how
to reduce the adverse impact of climate change on the safety and
soundness of the American financial system.
Thank you.
[The prepared statement of Ms. Rodriguez Valladares can be
found on page 66 of the appendix.]
Chairman PERLMUTTER. Thank you very much for your testi-
mony.
I now recognize Mr. Rothstein for 5 minutes for his oral testi-
mony.
STATEMENT OF STEVEN ROTHSTEIN, MANAGING DIRECTOR,
CERES ACCELERATOR FOR SUSTAINABLE CAPITAL MARKETS
Mr. ROTHSTEIN. Thank you, Chairman Perlmutter, and distin-
guished Members of Congress. Thank you for the invitation to be
here.
My name is Steven Rothstein, and I am the managing director
of the Ceres Accelerator for Sustainable Capital Markets. Ceres is
a nonprofit organization working with investors and companies to
build sustainable leadership within our firms and drive policy solu-
tions throughout our economy. Our membership represents Fortune
500 companies and investors with over $30 trillion of assets under
management.
Our testimony draws from Ceres reports that we have also sub-
mitted into the record, Mr. Chairman. I am not here to talk about
the systemic risk our climate has to our planet and our people, al-
though it is paramount to the lives of our children and grand-
children.
I am here to highlight the underrecognized risk to the safety and
soundness of our financial institutions due to climate risk and the
risks of the business-as-usual approach that some of the financial
institutions pose on a livable, climate-safe world.
If a banker or a bank regulator suggested that they don’t need
to plan for another pandemic or cyber attack, there would be a cho-
rus of opinions saying they are not meeting their fiduciary respon-
sibility.
Potential exposure to climate risk is bigger and more systemic.
Yet, there are leaders today in banking, insurance, and among fi-
nancial regulators that do not fully account for financial risk.
Even as we are working to overcome the unprecedented pan-
demic and the pain and loss that it brought, we have simulta-
neously had record-breaking fires, hurricanes, and unparalleled cli-
mate-related risks. As our Secretary of State said recently, we are
running out of records to break.
In short, we know more about the climate risk, as the chairman
said in his introductory remarks, than we knew about the mort-
gage finance risk in 2008. But, surprisingly, we are not acting with
the urgency required.
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
12
There are dozens of strong international examples from financial
regulators around the world, and we appreciate the initial steps
from the Department of the Treasury, the Federal Reserve, and the
SEC. But that is all they are, initial steps. So, we recommend that
regulators take five immediate steps.
One, immediately affirm the systemic nature of climate risk and
its impacts on the financial market. The affirmation can take the
form of a statement of an agency Chair or a report from the agen-
cy.
Two, activate action on prudential supervision, as some of my
colleagues have said. U.S. regulators have an explicit responsibility
to supervise the risks that financial institutions take on. Consistent
with that mandate, financial regulators should integrate climate
change into the prudential supervision of banks, insurance compa-
nies, and other regulated financial institutions.
The Federal Reserve, in particular, should take immediate steps
to assess the climate risk to financial markets and mandate sce-
nario analysis by the banks and the other financial institutions it
supervises.
They should also outline plans for conducting pilot climate stress
tests of its supervised institutions to measure the impact of cli-
mate-related shocks and consider enhancing capital and liquidity
requirements.
In addition, we recommend that the Federal Reserve, the FDIC,
the OCC, and the National Credit Union Administration expand
their examiner training programs and manuals to ensure that staff
fully understand climate risks faced by the financial institutions
they monitor.
Three, support the SEC’s work on mandatory climate disclosure.
We congratulate the SEC for their initial steps and hope they will
be issuing bold rules later this year.
Four, address how climate risks further exacerbate systemic rac-
ism, particularly as reflected in financial institutions. Financial
regulators should develop strategies to address systemic climate
risks and structural racism in an integrated way. The Community
Reinvestment Act is a ripe opportunity to do this.
Five, build capacity for smart decision-making on climate change
by coordinating action with other U.S. and global regulators and by
hiring and training additional staff.
Coordinated action by U.S. regulators at the global, Federal, and
State levels is essential to accelerating this. The FSOC generally,
and the Biden Executive Order that has been referred to, are crit-
ical steps. We appreciate the recent actions of U.S. financial regu-
lators to coordinate with global peers as a start.
To conclude, U.S. financial regulators have a critical role to play
in ensuring the resilience of our economy, weakened by the global
pandemic and systemic racism, and threatened by future climate
shocks. The fundamental safety and soundness of our financial in-
stitutions is relying on them and on each of you.
Thank you again for this opportunity.
[The prepared statement of Mr. Rothstein can be found on page
104 of the appendix.]
Chairman PERLMUTTER. Thank you for your testimony. You hit
that right on 5 minutes, so I appreciate that.
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
13
Dr. Rossi, you are now recognized for 5 minutes.
STATEMENT OF CLIFFORD V. ROSSI, EXECUTIVE-IN-RESI-
DENCE AND PROFESSOR-OF-THE-PRACTICE, ROBERT H.
SMITH SCHOOL OF BUSINESS, UNIVERSITY OF MARYLAND
Mr. ROSSI. Thank you, Chairman Perlmutter, Ranking Member
Luetkemeyer, and members of the subcommittee. I am Dr. Clifford
Rossi, professor of the practice and executive-in-residence at the
Robert H. Smith School of Business at the University of Maryland.
The views that I am expressing today are solely my own and do
not represent those of the University of Maryland.
I am here today to inform the subcommittee that imposing cli-
mate risk mandates on regulated depository institutions at this
time would be detrimental to consumers, to the financial services
sector, and to the economy at large.
Let me be clear: Climate change is a real risk that requires a
firm understanding of the current limitations of climate models,
underlying data, how those data do and do not integrate with
standard financial and risk models, and numerous other compo-
nents in order to craft effective solutions to the underlying risk.
I offer a unique perspective on this issue, having worked for
about 23, 25 years, depending on sort of how you calculate those
things, in the financial services industry, first as a regulator during
the S&L crisis, and then at both Fannie Mae and Freddie Mac—
pre-conservatorship—as well as at one of the largest commercial
banks, the largest savings and loan, and the largest non-bank
mortgage company during my tenure as a C-level risk executive,
and now as a finance and risk professor working on climate risk
issues and banking.
Models in use today for climate scenario analysis are designed to
represent the physics of a complex Earth system well into the fu-
ture, and their output is limited for near-term use by financial in-
stitutions.
As I have outlined in my written testimony, the models upon
which urgent demands for a public policy response are based are
subject to significant model risk. Model risk can be defined as the
risk associated with errors in data, methods, or assumptions used
to generate output from analytical models used for decision-mak-
ing.
Forcing financial institutions and their regulators toward expan-
sive climate risk regulation based on effects that are not well-un-
derstood presents more risk to the financial system than a staged
and methodical approach.
Now, I applaud the intent of the Biden Administration, through
their Executive Order, to assess climate-related financial risks and
data. However, I would caution policymakers and regulators from
imposing measures on regulated depositories based on the state of
current climate analytics for the following reasons.
First, the output from climate and associated integrated assess-
ment models, or IAMs, are not close to being ready for use in bank
financial and risk analytics such as bank stress test modeling, and
suffer from the supposed, ‘‘square peg in the round hole’’ syndrome.
The empirical linkages between long-term climate effects and
short- to intermediate-term financial and risk factors are not suffi-
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
14
ciently established currently to properly assess physical or transi-
tion risk impacts to the banking system from climate change.
Second, both the climate and integrated assessment models upon
which scenarios such as those proposed by the Network for Green-
ing the Financial System (NGFS) are based are subject to consider-
able empirical error due to the underlying complexity of these mod-
els on interactions that are not fully understood in the scientific
and financial research communities.
Now, why is this important? Requiring banks to make hard
money strategic decisions on lending, capital allocation, pricing,
and other activities that have long-term consequences for con-
sumers, the financial system, and economic growth based on mod-
els with a high degree of uncertainty is not at all consistent with
prudent model risk management practices.
Third, it is well-established in the psychology and economics lit-
erature that decision-making is affected by a number of cognitive
biases. One of these is what I refer to as model or shiny object bias.
Model bias occurs when decision-makers embrace the results
from highly-sophisticated quantitative models based on perceptions
that the apparent analytical rigor in those models necessarily
translates into accurate and reliable outputs.
There is widespread shiny object bias in the use of climate and
integrated assessment models today among policymakers world-
wide. This poses serious concerns regarding the use of these models
for anything other than research applications at this time, as de-
scribed earlier. Placing bets on financial markets on such models
invites a host of long-term unintended consequences on the finan-
cial system.
Climate change is a real risk that banks and other financial in-
stitutions should actively incorporate in with their existing risk
management processes. However, such firms must take measured
steps to understand these risks and not be forced into conducting
analyses for which the models and outputs are not well-understood
as they relate to financial services.
Banks should instead focus attention on bolstering their risk
awareness to climate change, starting with enhancing their risk
governance process and controls, data, and analytics.
Quantifying with a reasonable degree of confidence the impacts
of physical and transition risk from climate change will require sig-
nificant effort, time, and a true interdisciplinary approach between
climate scientists and the very people who are actually running fi-
nancial and risk management at these organizations and gathering
additional data and modifying existing models.
This work should commence, and only when the results have
been deemed to conform to regulatory model risk standards should
consideration of the disclosure and use in financial decision-making
be permitted.
Thank you for your time, and the invitation to testify on this im-
portant matter, and I look forward to answering your questions.
[The prepared statement of Dr. Rossi can be found on page 95
of the appendix.]
Chairman PERLMUTTER. Thank you, Dr. Rossi.
And thank you to all of the panelists. You were all right on time
or a little early. So, I appreciate that.
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
15
I will now recognize myself for 5 minutes for questions. And we
will get through as many of the Members as we can before we have
to break for votes. We might be lucky and get through all of us.
We will see.
Dr. Rossi, I want to just start with where you have left off. And
I think we would agree. A number of us on this committee are also
on the Science Committee, and yesterday we had a hearing on the
science of wildfires or wildfire predictions, mitigation, and a whole
variety of things. And I don’t think we would disagree with you
that we don’t have all of the science we would like to predict
wildfires.
In Colorado, we had our worst wildfire season ever last year, and
most of the Northwest is frying right now. But, in my opinion, that
is not a reason to not begin to put precautions in place.
So, Dr. Cleetus, Colorado, as I just said, had its worst wildfire
season on record. The three largest wildfires in our State’s history
occurred in 2020, torching over 540,000 acres.
Climate change is now forcing Colorado and many other States
to prepare for larger and more destructive wildfire seasons. In fact,
the director of the Colorado Division of Fire Prevention and Control
just remarked, ‘‘We are having fire years, not fire seasons any-
more.’’
In the West, we have wildfires. The Gulf has hurricanes. There
is increased flooding in the South and the Midwest. And these
changes are having a significant impact. The smoke that comes
into the Denver area from the wildfires either in Colorado or the
West is affecting our tourist industry and our housing industry.
As the severity and frequency of extreme weather events con-
tinues to rise, how will the housing market react? And what does
it mean for homeowners in climate-sensitive areas?
Ms. CLEETUS. Yes, as you are pointing out, the reality is that
this is not some distant future. These climate impacts are here and
now. And it is very clear from the science that hotter, dryer condi-
tions in the West are contributing to these longer, more intense fire
seasons. It is undeniable. And, unfortunately, the uncertainty, to
the extent it exists, seems to be breaking in the wrong direction.
This is why the precautionary principle that the other panelists
highlighted is so important. We are talking about managing risks;
we cannot avoid them completely.
And what we are starting to see is the insurance market reflect-
ing this risk with wildfires, where we have seen insurers drop pol-
icyholders, or try to raise rates. State regulators have had to step
in with stop-gap measures. We have thousands of homes at risk
right now in the West, millions, actually, if you look across all of
the States in the American West. And this risk is growing, both be-
cause of climate change and also our development patterns and
how we manage our forests.
So, we have to act on all fronts to make sure that we contain this
risk. Otherwise, both the economic consequences, as well as the
public health and human toll, will rise every year, unfortunately.
Chairman PERLMUTTER. Thank you for your answer.
Several of us on this committee—I was a bankruptcy lawyer rep-
resenting financial institutions for many years, and we have indi-
viduals who were bankers or bank regulators on this committee.
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
16
And the failure of Pacific Gas and Electric, the failure of many oil
and gas companies and their bankruptcies, make me concerned
about the impact on the financial industry.
So, Ms. Rodriguez Valladares, 2 years ago this subcommittee
held a hearing about how leveraged lending may pose a threat to
financial stability. As you know, leveraged loans are characterized
as corporate debt extended to highly-indebted non-financial busi-
nesses.
How does leveraged lending interact with climate risk? And what
types of institutions are particularly exposed?
Ms. RODRIGUEZ VALLADARES. This is really a very good point that
you make. I have published 40-some-odd articles about leveraged
lending and collateralized loan obligations, and we should defi-
nitely be very concerned, because American companies are more le-
veraged than they ever have been historically, either in aggregate
amounts or when you see it as an equivalent percent of gross do-
mestic product (GDP).
And there are incredible interconnections because a lot of these
companies, especially in the energy sector, which presently is ex-
hibiting a very, very high default probability, are incredibly vulner-
able to extreme climate events.
And there is a lot of opacity in leveraged lending and
collateralized loan obligations, and there are a lot of interconnec-
tions between the non-banks such as hedge funds and private eq-
uity, home offices, and other types of financial institutions of that
nature. They are very interconnected to banks. They hold a lot of
these leveraged loans and a lot of these securitizations.
We definitely need to be very, very mindful about their prob-
ability of default, and especially those companies that are immi-
nently affected either by the physical or the transition risks.
Chairman PERLMUTTER. Thank you very much for your response.
My time has expired. I now recognize the ranking member of the
subcommittee, the gentleman from Missouri, Mr. Luetkemeyer, for
5 minutes.
Mr. LUETKEMEYER. Thank you, Mr. Chairman.
Mr. Rossi, in your testimony you have a graph in there, ‘‘Long-
Term Changes in the Earth System.’’ And the first graph talks
about land surface temperatures, and it starts out at 1850.
And it is interesting, because that seems to be where most people
who want to talk about climate change want to start, is 1850. It
is interesting, because that is actually the trough of the cold trend
that started at that point—or ended at that point. If you actually
take the chart and you go back 1,000 or 2,000 years, you see this
wave effect.
And so what I am saying is, if you take that chart and go in the
other direction, which is what we are trying to talk about today,
actually within the next probably 25 to 50 years, you are going to
see the wave start going in the other direction.
And we are talking here today about modeling. If you are in the
banking business and you are trying to model what your risks are
with regard to climate change, if you go back 5 years or 50 years,
it is one thing, and if you look forward 5 years or 50 years based
on what you saw in the past, that is really—you need a crystal ball
to look at all of the things that have happened in our economy and
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
17
the world in the last 5 years or 50 years. And then try and project
that to the next 5 years or 50 years and look at—and you throw
in there the technology and things like that.
How do you, Dr. Rossi, analyze this when you look at the fact
that this wave could actually go in the other direction? And we are
looking at trying to model this so we actually get an assessment
of true risk. How can you do that? You just got done talking about
how you didn’t think that could actually work. Could you elaborate
on that a little bit? Am I wrong in my assessments here?
Mr. ROSSI. No. And as someone who actually either developed or
oversaw the development of such models in the past, either loan
loss reserving models or stress test models, I can tell you for sure
that this is probably one of the most difficult, if not the most dif-
ficult exercise that banks will face in estimating or assessing risk
in their portfolios.
As for all the reasons that you just described, in the case of cred-
it risk or market liquidity or these other risks that are out there,
we can get our arms around that pretty readily because we have
that data, we have that historical time series, that is, to be able
to kind of ingest that into our financial and risk models and project
out how much capital we will have.
When we are talking about taking physical outputs, such as how
many gigatons of greenhouse gases are spewed out, and trying to
translate that into macroeconomic factors that then translate in
turn to how much risk is on our lending or investment portfolios,
that is what we are talking about as being extraordinarily difficult
to do.
And keep in mind that when we do that, we are today really only
going out, as was said earlier, 9 quarters forward on our stress
test, so trying to go out 5 years or even 10 years, or more than that
creates an enormous amount of uncertainty, such that if we are
trying to estimate the tail of the distribution, as other witnesses
have talked about, the tail of that distribution is so noisy, it would
be very, very difficult to quantify that with any degree of reli-
ability.
And personally, as someone, as a former CRO, signing a sub-at-
testation, I would not today, given where the state of climate mod-
els are today, sign any sub-attestations related to climate risk.
Mr. LUETKEMEYER. If you take that one step further then, the
concern that we need to be thinking about here is if you destroy
the fossil fuels industry based on this graph showing continued
warming, and all of a sudden in a few years it turns the other way,
we have destroyed an industry that we definitely need and are
going to need in the long term for many different reasons.
It would seem to me that we need to be very careful how we go
into this modeling situation. Would you agree with that?
Mr. ROSSI. I would agree with that. And I want to be clear here.
I am not saying not to do anything—I am not saying that. I am
saying that we need to start in a very methodical fashion. There
are things that we can do today that aren’t going—leapfrogging to,
let’s adopt what is in these IAMs and climate models today and
just start to implement stress tests and—
Mr. LUETKEMEYER. Mr. Rossi, let me quickly interject here.
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
18
You talked about some things we could do. Would you identify
things that financial institutions or regulators, what significant
data things they can put together today to actually make it work?
Mr. ROSSI. Yes, absolutely. First and foremost—and I am a sim-
ple-minded guy when it comes to these things—is to do what you
understand right now.
What banks can understand right now are the positions on their
portfolios that are exposed to different climate events. They can ac-
tually engage with vendors that are out there that can supply this
information that can help them assess what their exposure is to
wildfire risk or drought or flooding, and they can size that up in
terms of the probability of those outcomes, as well as the impact
or the severity of those outcomes. They can do that today.
The other thing that they can do is to start to do what I have
done in an academic research paper that will be published later
this year, to actually try to tie, to determine these empirical link-
ages between physical outputs, let’s just say hurricane impacts, se-
verity and frequency of hurricanes, to, let’s say, mortgage default.
Trying to establish those empirical linkages will be extraordinarily
important to actually getting a better handle on estimating what
this climate risk looks like on these bank portfolios.
Mr. LUETKEMEYER. Thank you for your response. I am out of
time. Thank you, Dr. Rossi.
Chairman PERLMUTTER. Thank you, Dr. Rossi, and Mr. Luetke-
meyer.
The Chair will now recognize Mr. Foster, who is the only physi-
cist in Congress. But apparently, he is going to yield to Mr. Casten,
an engineer.
Mr. FOSTER. Thank you. And I yield to Mr. Casten.
Mr. CASTEN. Thank you, Mr. Physicist.
I truly hope we are not still arguing about whether climate
change is real. My goodness, the science is so settled. We know the
last time CO2 was this high. Sea levels were 50 feet higher. Let’s
move on.
If you don’t believe the scientists, listen to Fed Governor Lael
Brainard, who said in January that the science is settled but the
impact on our financial sector is highly uncertain, that we should
be concerned about the impact of rapid repricing events. I am par-
tially misquoting that.
We had Jamie Dimon in a couple of weeks ago, and he said that
JPMorgan is not reducing their fossil fuel exposure. And I said,
‘‘Okay, have you changed your senior debt, sub debt equity level?’’
He said, ‘‘No, not yet.’’ And I said, ‘‘Can I assume that you will once
you see things coming?’’ And he said, ‘‘Oh, absolutely.’’
So my first question for you, Mr. Rothstein, is, we know once
these changes come, the sophisticated players will see it coming
first and we will have capital movement in the system.
Can you explain to us the difference between stress testing the
banks and scenario modeling the system, and how you think we
should be balancing those two to make sure that our system is ro-
bust and continues to be robust?
Mr. ROTHSTEIN. Thank you, Congressman. And thanks for all of
your leadership on this issue.
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
19
We have a very diverse system with thousands of banks, and
while the biggest banks, obviously, are responsible for the loans,
most people operate with small banks. They have to operate in a
very concentrated area. They are more at risk for physical risk be-
cause they tend to loan within a 5- to 10-mile area.
We did an analysis of the largest 20 banks and looked at their
syndicated loan portfolio, just to use the same methodology that
the European Central Bank did, and for that we identified over
half-a-trillion dollars of exposure.
What we need to do is use every tool. Climate change is an all-
of-government initiative, it is an all-of-society initiative. We have
to do stress tests on individual bank portfolios and then we have
to look at scenario analysis for the whole system, both small and
large.
Mr. CASTEN. I want to follow up, because your point about small
banks intrigues me, because there is the physical risk that at least
we think we understand—there are lots of ripple effects—but then
there is the transitional risk that shifting wealth from energy pro-
ducers to energy consumers is good for Americans, but it creates
our political tension. And I find myself thinking, is the First Bank
of Frankfort, Kentucky, going to be okay?
Does this feel more like the S&L crisis than the 2008 crisis to
you, as we think about how diverse the exposure is going to be in
the system?
Mr. ROTHSTEIN. I believe, Congressman, that the exposure is
even broader and more systemic than either of those.
For a small bank, they could be affected on physical risk if they
are in an area with fires, floods, or tornadoes. But they also could
be if they are in an area that is an energy-producing community
and the jobs decline in that sense.
Last year, the oil companies wrote off $145 billion of assets in
the first 3 quarters. That is banks, insurance companies, and inves-
tors that are somehow dealing with that, so this is a deeper and
wider potential area of exposure than any of those.
Mr. CASTEN. As I pointed out recently, ExxonMobil didn’t write
off all of that money because they were woke.
I want to shift, if I could, with the little time I have left, to Ms.
Rodriguez Valladares.
I really appreciated your comments. I was in the energy industry
for 20 years before I got here, and we used to joke that you could
always tell that there was a downturn coming in the energy sector
because the big banks started creating special purpose energy op-
portunities funds for—that was the thing they were doing to move
assets into non-Dodd-Frank-compliant vehicles.
Assuming that we pass this legislation, including my bills that
are noticed in this markup, and the Biden White House moves, we
are probably 2 years away, realistically, from getting all of these
changes implemented.
I don’t know what you think of my own metric, but are there
metrics you think we should be watching in the financial system
that will be a sign that the sophisticated players are starting to off-
load risk onto other players?
What are the red lights you are watching that you think we
should be paying attention to in these next few years?
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
20
Ms. RODRIGUEZ VALLADARES. One thing, of course, is to watch
whether banks are increasingly selling their loans that are exposed
to climate change. Are they selling their commercial real estate
loans, ag loans, energy loans to special purpose vehicles? Then that
tells you that they are trying to get rid of that risk because it
weighs on their capital and their leverage requirements.
I think also watching the number of loans that they underwrite
to these sectors that are so sensitive to climate change is also an-
other important signal.
But it is not just about banks’ exposure to these kinds of compa-
nies from the lending side. Let’s not forget that banks also are in
financial derivatives and repos with these different kinds of compa-
nies, to also see whether that is lessening. That is another signal
that they feel that this is of concern.
I am a little concerned about some of the comments that I am
hearing that we have no data to be measuring climate change risk
and how it can affect default probabilities or how it can affect mar-
ket volatility, because if there is one thing Americans are known
for, it is for data.
Chairman PERLMUTTER. I am going to interrupt you, and some-
body else will let you finish your answer to that question. But
thank you very much for your testimony.
And I thank the gentleman for his time.
I now recognize the gentleman from Oklahoma, who is also the
ranking member on the House Science Committee, Mr. Lucas.
Mr. LUCAS. Thank you, Mr. Chairman.
Today’s hearing is an opportunity to have a constructive dialogue
on the issue of climate risk in the financial system.
We know that the climate is changing and that global industrial
activity has played a role in this. Further, I believe my friends on
the other side of the aisle would agree that Congress and the regu-
lators still have much to learn about the implications of climate
change in the financial system. However, the argument that we are
in a race against a ticking climate Doomsday Clock is counter-
productive to achieving real progress on this issue.
The United States has already made progress in the science and
innovation needed for cleaner energy production. Weaponizing the
financial regulators to drive capital away from fossil fuels, still the
most reliable and essential form of energy in the United States,
would have dire consequences for the economy and U.S. competi-
tiveness abroad.
Instead, we need a more thoughtful approach based on the cur-
rent state of climate risk assessment tools.
Dr. Rossi, the electric power grid is absolutely essential to the
U.S. economy, generating the energy needed for businesses and
families across the country. In 2020, fossil fuels were the largest
source of U.S. electricity generation, at about 60 percent. Nuclear
energy was the source of roughly 20 percent.
So, Dr. Rossi, could you speak to the potential consequences to
the U.S. economy if we see a rapid government-driven disinvest-
ment away from fossil fuels and nuclear energy?
Mr. ROSSI. Yes. In the near-term, we could see several things.
First of all, let me give you some perspective. These are num-
bers—I have been looking at Citigroup recently, and a little while
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
21
ago, they released their climate financial disclosure for this year,
and it was very interesting. One of the things that they flagged
was their oil and gas exposure of something in the order of 50-plus
billion dollars or so, pretty sizeable, but only about 6 or 7 percent
of their overall exposure.
Why that is important is because imagine now if you have mul-
tiple banks, just like what happened during the liquidity coverage
ratio implementation several years back when banks were looking
at trying to measure how much liquidity they had on their balance
sheet from a regulatory requirement standpoint and found that
they were—some of the largest banks were certainly not in compli-
ance.
And what would they do? They would have to then rotate out of
some of their lesser high-quality assets into higher-quality assets.
They would have to sell mortgage-backed securities in order to try
and comply by buying U.S. Treasuries.
In this case, divesting from oil and gas investments would actu-
ally have a further amplifying effect, downward movement effect,
that is, for some time period, which would actually cause the prices
of oil and gas to go down, those securities, and in addition would—
temporarily anyway—impose some harm to the balance sheets of
these banks.
Now, I am not saying it is crushing by any sense. They are well-
capitalized. So, that is not going to be an issue.
But from a knock-on effect standpoint, we are talking about im-
pacts associated with lack of investment if banks aren’t lending
again to oil and gas companies, their inability to do the kind of ex-
ploration that is needed to continue to provide us with the supply
necessary to have heating and having to fuel our cars, and that
sort of thing.
So, it would have adjacent effects on increasing prices to con-
sumers for things like utility bills, prices at the gas pump, et
cetera, and so certainly would have adverse consequences in the
near-term for that.
Mr. LUCAS. Continuing with you, Dr. Rossi, you explained in
your written testimony how climate credit default swaps could be
utilized as a risk-mitigation tool for climate-related events. Could
you discuss further how this financial tool could be used?
Mr. ROSSI. Sure. The idea here is simply—and I think one of the
other witnesses mentioned the use of financial derivatives by finan-
cial institutions. And during the financial crisis, I think Warren
Buffet famously said something to the effect of, these were weapons
of financial mass destruction.
Actually, derivatives are an important risk-mitigation tool that
are used extensively in the industry for things like transferring
credit risk to private investors, such as what is going on with the
Government-Sponsored Enterprises (GSEs), Fannie Mae and
Freddie Mac, in transferring credit risk off their balance sheets and
onto other private investors.
In the case we are talking about here, we have had for many
years weather derivatives, rainfall derivatives, and we have had
temperature derivatives that have not really kind of taken off
much in the industry.
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
22
But as climate change accelerates and continues to evolve, we
need to think about developing credit- or climate-related derivative
tools that could remove that risk off of these balance sheets.
You could imagine that both Fannie and Freddie, for example,
that are engaged heavily in credit risk transfer of their securities
to—or of their mortgage losses, that is—are exposed increasingly,
potentially, to more hurricanes and flooding events if and when
that occurs from climate change.
Being able to transfer that off directly by way of what is called
a climate derivative instrument, just like a credit default swap
(CDS), where there is a buyer and a seller in that market for that,
a bank or a GSE could, for that matter, buy protection from a sell-
er on the other side, and that is how that climate derivative could
actually function.
Chairman PERLMUTTER. Thank you, Dr. Rossi.
Mr. LUCAS. Thank you, Mr. Chairman.
Chairman PERLMUTTER. The gentleman’s time has expired.
Mr. Vargas, the gentleman from California, is now recognized for
5 minutes.
Mr. VARGAS. Mr. Chairman, thank you very much for holding
this hearing.
I want to thank all of the witnesses for being here today. I found
this very informative.
Dr. Rossi, have you ever seen hearings like this before with Con-
gress, when you have witnesses testifying?
Mr. ROSSI. I have actually testified twice before, yes.
Mr. VARGAS. The way I think it usually works is this way. You
have one side, it doesn’t matter, but one side will say something,
and then, if they are in the Majority, they will have two or three
witnesses, and then the last witness will say just the opposite.
It is sort of analogous to the issue: Do cigarettes cause cancer?
Yes, they do, and they destroy your lungs. And the next one: Oh,
yes, they cause cancer, yes, they do. And then the last guy always
says: No, they are healthy. They keep you thin and fit.
But in this case, I think that almost everyone agrees that climate
change is real.
Now, I have been arguing this point for decades, and I have had
a hard time with some of my colleagues on the other side accepting
it. And I think you said it until I heard you say, from some of the
examples given by my friends on the other side, well, this kind of
happens in history, you kind of go one way and then the other way.
Do you think that climate change today, a large part of that is
because of human actions and what we do?
Mr. ROSSI. I do. And that is based on the fact that I work on a
fairly regular basis with climate scientists now at the University
of Maryland and I have seen the data. I am not a climate naysayer.
And I don’t know that folks on the other side, of your side, are ei-
ther.
I think what we are trying to figure out, though, is how best to
move the ball along in a way that doesn’t destroy the economy in
the short term, while making sure that we have what we need to
protect everybody from climate change.
Mr. VARGAS. I have to tell you, I think that is a big step forward,
honestly. I think that is a big step forward, just saying that the
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
23
science is settled. Because, again, I hear some of my friends on the
other side say, well, wait a minute, but it does this all the time,
and we can’t really do much about it, it will destroy our economy,
it will destroy our world if we try to do anything about our actions.
You don’t agree with that?
Mr. ROSSI. I would say that there are long-term climatological ef-
fects that have occurred throughout thousands of years, and that
there is no dispute. I also don’t think that there is any dispute that
there are human-based changes that have occurred over the last
150 or so years based on the data that I have seen.
At the same time, we do need to take care about how we move
forward, because the models underlying that have significant
issues. I don’t think we are debating the climate change; we are de-
bating how we can best implement them into financial models.
Mr. VARGAS. I think I understood your testimony well, and you
said you have the shiny models and you chase the shiny thing. You
find out the shiny thing is going to hurt you because it is not mod-
eling it right, and you can do real damage to the economy and
these large companies and other companies. I think I understood
that.
And I appreciate your testimony, I really do. I think it is a huge
step forward.
Dr. Cleetus, you said that back in 2020, the nation experienced
nearly 59,000 wildfires, which burned approximately 10 million
acres. About 40 percent of that was in California, and CAL FIRE
now says that 3 million homes are at risk in California, so much
that, in fact, we have to do something.
What can we do? I have a bill that passed out of here with others
about at least disclosures, at least disclosing this information.
Don’t you think that is a good idea, at least doing that?
Ms. CLEETUS. I think this is the main problem here. We have a
real information asymmetry going on in the financial sector.
Believe me, there are sophisticated actors in the financial sector
who have proprietary data sets. They are moving their assets
around. It is the ordinary public that is being left exposed, the tax-
payer that is being left exposed.
We have done some research just using publicly-available data
from NOAA, tide gauge data, looking at sea level rise and the risk
to coastal property.
What we found was that over 300,000 homes and commercial
properties with a collective market value of $136 billion today are
at risk just by 2045. That is within the lifetime of a mortgage
issued today. There is someone who is going to be left holding the
bag when those houses start to flood.
Mr. VARGAS. I want to interrupt you just for a second to give Ms.
Mayra Rodriguez Valladares an opportunity to tell us about that
data you were talking about.
I have 23 seconds. Go ahead.
Ms. RODRIGUEZ VALLADARES. We have a lot of data in the United
States, both from scientists, so we have just hundreds of years of
scientific data that can be used, and we also have a lot of different
kinds of probability of default data. We have incredible profes-
sionals in quantitative fields both in and outside of financial insti-
tutions.
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
24
There is a lot there that we can be doing to model climate change
risks. And models are dynamic. We should be working on that al-
ready, and not wait until it is too late.
Mr. VARGAS. Thank you. My time has expired.
Thank you very much, Mr. Chairman.
Chairman PERLMUTTER. Thank you, Mr. Vargas.
Votes have been called, but I think we can get through the ques-
tions of Mr. Posey, Mr. Lawson, Mr. Barr, and Mr. Kustoff. So,
those of you who aren’t going to be asking questions can go vote,
if you choose.
I would now like to recognize the gentleman from Florida, Mr.
Posey, for 5 minutes of questioning.
Mr. POSEY. Thank you very much, Mr. Chairman.
Dr. Rossi, we are here today to explore an expansive role of the
government in our economy to reduce systemic financial risk. His-
tory suggests that government has repeatedly missed the mark on
ensuring such financial stability.
What assurances do we have that government can and will do
better than the private sector and individuals in assessing and re-
sponding to potential financial risks posed by climate change?
Mr. ROSSI. If what you are asking is about whether or not we can
regulate climate change by way of financial institutions, I think
that is a tricky problem to address, because on the one hand, as
we were talking about earlier, forcing divestment, for example, or
some variation of that from financial institutions out of oil and gas
would very much have a negative impact.
And so, from a safety and soundness standpoint, when we think
about what the role of those safety and soundness regulators are,
they are there to ensure that the long-term viability of those finan-
cial institutions is, in fact, intact.
Forcing them to implement some sort of changes in the way in
which they are balance-sheeting certain asset types is certainly not
consistent with the way in which our economy or our financial sys-
tem has gone in the past.
That is an issue that I see associated with that.
Mr. POSEY. Thank you.
To follow up on that, Dr. Rossi, we have in recent history faced
some pretty large shocks. I recall the large oil price shocks from
OPEC that plagued us for years before we attained our recent en-
ergy independence.
Looking over our shoulder literally right now at COVID-19,
should we really start selecting out the risks of the day, like cli-
mate change, and build an entire new regulatory apparatus around
them?
Mr. ROSSI. Here’s the thing. Climate risk, depending on whom
you talk to, is a fairly long-tailed risk. It is not one you could say,
okay, today we had 115-degree temperatures in Portland and Se-
attle. There is a difference between weather and climate. So, those
things might, in fact, turn out to be predictive of longer-term cli-
matological changes.
But what I will say from a risk-management standpoint is, from
a banking perspective, there are risks that we—financial risks,
market, credit, liquidity risks that we need to be managing, and
banks do manage those very effectively today, credit risk. And then
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
25
the nonfinancial risk, in which I would include operational risk,
those actually are things that also have to be addressed.
Mr. POSEY. People like to talk about risk, and there is a ref-
erence to the risk that government climate regulations might pose
in the Chair’s memo for this hearing.
I recall that Milton Friedman said, ‘‘The Great Depression, like
most other periods of severe unemployment, was produced by gov-
ernment mismanagement rather than by any inherent instability of
the private economy.’’
Isn’t there a rather large risk about regulators who get it wrong
on climate risks like they did in mismanaging the money supply in
the Great Depression? And should we—
Mr. ROSSI. Well—
Mr. POSEY. Go ahead.
Mr. ROSSI. I’m sorry. Absolutely. I do think that there is exactly
that type of risk until we are armed with the information that
would give us the degree of reliability that we have those risks un-
derstood.
And all of the risks that I just mentioned earlier, the financial
risk, the nonfinancial risk that banks are on point to manage today
in their day-to-day operations, there is a wealth of historical infor-
mation from which they can draw upon to be able to make those
assessments.
I will say that the one that they have the most difficulty with
is the risk associated with operational risk, because we just don’t
have that type of data there.
And if we don’t have the right type of data there, and we have
been dealing with operational risks for many, many years, imagine
the issues that we have associated with trying to get our arms
around and quantify climate risk impacts from a physical and tran-
sition risk standpoint.
That is extraordinarily difficult. And anybody who will tell you
that the data exists for banks to be able to make very precise esti-
mates and make hard money decisions on that, I am just not a
buyer on that.
Mr. POSEY. Okay. Thank you very much, Dr. Rossi.
I see my time is about to expire. And so, Mr. Chairman, I yield
back.
Chairman PERLMUTTER. Thank you, Mr. Posey.
I now recognize another gentleman from Florida, Mr. Lawson, for
5 minutes.
Mr. LAWSON. I would just like to say to my colleague, Mr. Posey,
that we worked so hard, because of natural disasters in Florida, on
citizens establishing a government-run insurance program to make
insurance available.
And this is to everyone. The effects of climate change, as seen
year after year, are strong, and more frequently, natural disasters
are destroying homes and businesses at record-breaking rates.
In 2018, Hurricane Michael hit the Florida Panhandle where I
am, causing approximately $25 billion in damage and devastating
our local community. Only a few months after Michael hit, we saw
property insurance rates increase, leaving some Florida home-
owners unable to find affordable policies.
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
26
What steps should Congress ensure be taken to address these
issues, because they come every time? And we were devastated in
Florida after Andrew, and even Michael, and it is just never going
to stop. But we have to do something here in Congress to make
things happen.
This question is posed to everyone: What do you think we should
be doing in Congress?
Ms. CLEETUS. If I could jump in, I think that there are two really
important things going on here. One is that we are seeing in a sys-
temic way these risks rising over time, as you pointed out. And the
other is that we have many, many people, low-income folks, fixed-
income folks, who are being really harshly punished by the finan-
cial consequences of these disasters.
In terms of insurance, we need to make sure that more people
are carrying insurance in the first place. It needs to be more widely
available, and more affordable. But at the same time, we need to
recognize that some of these risks over time are going to become
inherently uninsurable in some of the highest-risk places.
So, we have to create other pathways out of risk for people.
There are so many, many people on the front lines of this risk. In
the State of Florida, for example, we have to create pathways out
of risk, because right now it is not just having financial con-
sequences, but taking a real toll on people’s lives and their well-
being.
Mr. LAWSON. I have a little bit of a follow-up. Many residents
quickly found out, as you stated earlier, that their policy didn’t
cover the damage caused by rising waters. Climate risk is not ade-
quately priced in the housing market. [Inaudible] Found that cur-
rent home prices, mortgage interest rates, and guaranteed fees in
the secondary mortgage market did not make much sense either.
There are a lot of concerns about rising water playing a role in
property values. What should Congress, the GSEs, and the housing
agencies be doing to address this concern?
Ms. CLEETUS. I think in the first place, it is really important to
evaluate the risk fairly and communicate that risk to the public.
We need better flood risk maps that actually communicate this in-
formation to the public so that they can make informed decisions
about what is likely to be their single biggest asset.
Right now, we have large swaths of the public who are largely
unaware of how serious these risks are and how quickly they are
coming.
The other piece of this is really building in an equity and justice
component into our climate resilience policies, because we are see-
ing communities of color get gentrified out of their communities,
and we are seeing resilience investments that benefit an elite few
and not the broader public. And that needs to change as we go for-
ward, because these risks are now affecting way too many parts of
our country.
Mr. LAWSON. Dr. Cleetus, you also testified that we can fix the
climate crisis. [Inaudible] Which I am not sure, if we don’t build
justice and equity into our solutions from the onset.
Will you please elaborate a little bit more on that, and how can
the whole-of-government approach be undertaken by Treasury Sec-
retary Yellen and the National Economic Council (NEC) and others
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
27
through the recent climate financial Executive Order to inform our
approach here?
Ms. CLEETUS. I think we ought to start with the fact that our
current market outcomes inherently have baked into them years of
structural racism and social-economic inequities. We have had com-
munities that haven’t been able to build generational wealth be-
cause of the legacy of mortgage redlining and the lack of access to
credit, as just one example.
And that means, when you have climate risk coming on, they are
coming on as a layer of additional risk over these longstanding
problems. As we create solutions, let’s not have Band-Aids on top
of the current system. Let’s actually be thinking about a more fair
and equitable system that keeps people safe, for everybody, not just
for a few.
Mr. LAWSON. With that, Mr. Chairman, I yield back.
Chairman PERLMUTTER. Thank you, Mr. Lawson.
We will get through Mr. Barr’s questioning, and then I think we
can adjourn this panel.
I would now recognize the gentleman from Kentucky, Mr. Barr.
Mr. BARR. I thank my friend, the chairman of the subcommittee,
and I appreciate the testimony of the witnesses.
I know that fighting climate change is in vogue and everyone
wants in on the action. But count me as someone who is a skeptic
that increasing bank capital requirements or punishing lenders for
not redlining energy companies is the way to go about it.
My colleagues and also some folks in the Administration clearly
want to weaponize the blunt instrument of bank capital require-
ments to force a precipitous and unrealistic and, I would argue, un-
economic transition away from fossil energy.
The problem is, this will do nothing to change demand. People
will still need to drive cars, turn on their lights, and heat their
homes. And the Biden Administration’s own data shows that fossil
energy will still make up more than 70 percent of consumption in
2050.
These efforts will just disrupt the supply side by shifting financ-
ing for those industries to less-regulated non-bank lenders, drive
up the cost of capital, and raise prices for consumers.
Now, I know some of the witnesses want our regulators to go be-
yond just banks and go into non-bank financing as well. But com-
bine all of this with data aggregated by the Bank for International
Settlements which shows that increases in capital requirements
lead directly to reductions in lending and it becomes clear that this
effort is not about managing financial stress, but it is really about
causing financial stress, specifically to those companies and indus-
tries that are politically unpopular.
Dr. Rossi, what impact would the assessment of capital sur-
charges, like those detailed in the draft Climate Crisis Financial
Stability Act, have on lending to fossil energy firms?
Mr. ROSSI. You have hit on many of the points that I would
make. I think the first one that I would mention is that raising
capital, first of all, will squeeze out lending in other segments, par-
ticularly in that segment.
If you are talking about, as I have seen, 150-percent risk rate as-
sociated with oil and gas investments as one of those proposed bills
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
28
has in it, I would be concerned, first of all, as to where does that
150-percent risk rate actually come from? What is the empirical
basis for that?
Because if you can imagine what that means, we are talking
about significant amounts of capital being dedicated to investments
in oil and gas which have knock-on effects, as I mentioned earlier,
in terms of lack of ability through lack of lending to be able to go
out and do the kind of oil and gas exploration that is needed to
keep us protected against having to go elsewhere abroad for our
fuel needs.
Mr. BARR. I do think there is a risk here that by choking off fi-
nancing to some of these energy companies that are really at the
forefront of innovation in carbon capture and other technologies,
that this could actually be very counterproductive.
And it does look like an effort to exploit climate as an excuse to
justify a move towards government central planning as opposed to
an effort to help deploy capital to innovative companies that actu-
ally might ameliorate emissions and decrease emissions.
Let’s talk about systemic risk for a second. There is an important
distinction between systemic risk and business risk. Systemic risk
has a very specific definition: A certain activity or entity has the
potential to actually bring down the entire financial system without
enhanced supervision. But business risks are the countless risks
firms manage every day, that if not mitigated properly, may have
an impact on their bottom line.
No one is denying the risk of changing weather patterns, and, in
fact, banks, insurers, and other financial firms are already man-
aging them as traditional business risk.
It is hyperbolic to suggest, as some of my colleagues and vocal
advocates have, that climate change, a phenomenon that occurs
over literally decades, can somehow suddenly and precipitously
overwhelm the banking system, the insurance sector, and the rein-
surance sector, especially when you consider that a lot of the stress
testing happens only over 9 quarters.
So, Dr. Rossi, how are banks currently managing climate risk,
and are they capable of effectively managing it without prudential
supervision?
Mr. ROSSI. I am going to take you back, Congressman, to the ear-
lier comment that I made about this with regard to Citigroup’s cli-
mate disclosure.
Now, again, I don’t work at Citigroup any longer, but having
looked at that just objectively, I would say that is a really good
first step in the process.
They have gone through and they have identified where their cli-
mate risk exposures are, and they have identified the governance
and the processes and controls that are necessary to manage cli-
mate risk. And they are doing it fairly comprehensively. Again, you
are talking about a far-flung portfolio reaching out to many, many
countries in terms of their investments.
I think they are on the right track, and I am sure all of the other
big banks are on a similar path to do that.
Mr. BARR. My time has expired. If I could just—if the chairman
would just indulge one final comment.
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
29
We talk about transition risk. A lot of these bills that are being
proposed by this hearing, I think create the transition risk.
Chairman PERLMUTTER. The gentleman’s time has expired.
Mr. BARR. I yield back.
Chairman PERLMUTTER. I thank him for that one additional com-
ment.
I would like to thank the witnesses.
I think there is agreement here that there is some real risk in
the financial system. And I think the question is, how long of a ho-
rizon can we really analyze and determine?
But there is no question that there is risk here. I think all the
panelists would agree.
And I just appreciate the testimony. I am sorry that it has been
kind of a rushed afternoon. I want to thank you all for your testi-
mony and for devoting the time and resources to share your exper-
tise with this subcommittee. Your testimony today will help ad-
vance the work of our subcommittee and of the House.
The Chair notes that some Members may have additional ques-
tions for these witnesses, which they may wish to submit in writ-
ing. 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 extra-
neous materials to the Chair for inclusion in the record.
This hearing is now adjourned, and I thank the witnesses. I am
going to come down and thank you personally.
And to those of you on the screen, thank you very much. Your
testimony was really appreciated.
And, again, we are in the middle of a very busy afternoon, so we
really appreciate you being here. Thank you.
[Whereupon, at 3:28 p.m., the hearing was adjourned.]
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 K:\DOCS\HBA181.150 TERRI
APPENDIX
June 30, 2021
(31)
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00037 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
32
Insert offset folio 1 here 45383.001
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00038 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
33
Insert offset folio 2 here 45383.002
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00039 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
34
Insert offset folio 3 here 45383.003
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00040 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
35
Insert offset folio 4 here 45383.004
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00041 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
36
Insert offset folio 5 here 45383.005
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00042 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
37
Insert offset folio 6 here 45383.006
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00043 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
38
Insert offset folio 7 here 45383.007
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00044 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
39
Insert offset folio 8 here 45383.008
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00045 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
40
Insert offset folio 9 here 45383.009
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00046 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
41
Insert offset folio 10 here 45383.010
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00047 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
42
Insert offset folio 11 here 45383.011
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00048 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
43
Insert offset folio 12 here 45383.012
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00049 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
44
Insert offset folio 13 here 45383.013
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00050 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
45
Insert offset folio 14 here 45383.014
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00051 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
46
Insert offset folio 15 here 45383.015
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00052 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
47
Insert offset folio 16 here 45383.016
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00053 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
48
Insert offset folio 17 here 45383.017
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00054 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
49
Insert offset folio 18 here 45383.018
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00055 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
50
Insert offset folio 19 here 45383.019
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00056 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
51
Insert offset folio 20 here 45383.020
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00057 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
52
Insert offset folio 21 here 45383.021
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00058 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
53
Insert offset folio 22 here 45383.022
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00059 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
54
Insert offset folio 23 here 45383.023
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00060 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
55
Insert offset folio 24 here 45383.024
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00061 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
56
Insert offset folio 25 here 45383.025
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00062 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
57
Insert offset folio 26 here 45383.026
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00063 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
58
Insert offset folio 27 here 45383.027
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00064 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
59
Insert offset folio 28 here 45383.028
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00065 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
60
Insert offset folio 29 here 45383.029
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00066 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
61
Insert offset folio 30 here 45383.030
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00067 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
62
Insert offset folio 31 here 45383.031
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00068 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
63
Insert offset folio 32 here 45383.032
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00069 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
64
Insert offset folio 33 here 45383.033
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00070 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
65
Insert offset folio 34 here 45383.034
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00071 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
66
Insert offset folio 35 here 45383.035
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00072 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
67
Insert offset folio 36 here 45383.036
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00073 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
68
Insert offset folio 37 here 45383.037
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00074 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
69
Insert offset folio 38 here 45383.038
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00075 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
70
Insert offset folio 39 here 45383.039
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00076 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
71
Insert offset folio 40 here 45383.040
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00077 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
72
Insert offset folio 41 here 45383.041
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00078 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
73
Insert offset folio 42 here 45383.042
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00079 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
74
Insert offset folio 43 here 45383.043
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00080 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
75
Insert offset folio 44 here 45383.044
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00081 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
76
Insert offset folio 45 here 45383.045
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00082 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
77
Insert offset folio 46 here 45383.046
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00083 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
78
Insert offset folio 47 here 45383.047
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00084 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
79
Insert offset folio 48 here 45383.048
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00085 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
80
Insert offset folio 49 here 45383.049
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00086 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
81
Insert offset folio 50 here 45383.050
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00087 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
82
Insert offset folio 51 here 45383.051
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00088 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
83
Insert offset folio 52 here 45383.052
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00089 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
84
Insert offset folio 53 here 45383.053
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00090 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
85
Insert offset folio 54 here 45383.054
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00091 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
86
Insert offset folio 55 here 45383.055
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00092 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
87
Insert offset folio 56 here 45383.056
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00093 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
88
Insert offset folio 57 here 45383.057
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00094 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
89
Insert offset folio 58 here 45383.058
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00095 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
90
Insert offset folio 59 here 45383.059
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00096 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
91
Insert offset folio 60 here 45383.060
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00097 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
92
Insert offset folio 61 here 45383.061
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00098 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
93
Insert offset folio 62 here 45383.062
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00099 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
94
Insert offset folio 63 here 45383.063
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00100 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
95
Insert offset folio 64 here 45383.064
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00101 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
96
Insert offset folio 65 here 45383.065
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00102 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
97
Insert offset folio 66 here 45383.066
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00103 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
98
Insert offset folio 67 here 45383.067
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00104 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
99
Insert offset folio 68 here 45383.068
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00105 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
100
Insert offset folio 69 here 45383.069
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00106 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
101
Insert offset folio 70 here 45383.070
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00107 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
102
Insert offset folio 71 here 45383.071
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00108 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
103
Insert offset folio 72 here 45383.072
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00109 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
104
Insert offset folio 73 here 45383.073
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00110 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
105
Insert offset folio 74 here 45383.074
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00111 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
106
Insert offset folio 75 here 45383.075
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00112 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
107
Insert offset folio 76 here 45383.076
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00113 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
108
Insert offset folio 77 here 45383.077
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00114 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
109
Insert offset folio 78 here 45383.078
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00115 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
110
Insert offset folio 79 here 45383.079
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00116 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
111
Insert offset folio 80 here 45383.080
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00117 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
112
Insert offset folio 81 here 45383.081
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00118 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
113
Insert offset folio 82 here 45383.082
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00119 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
114
Insert offset folio 83 here 45383.083
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00120 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
115
Insert offset folio 84 here 45383.084
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00121 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
116
Insert offset folio 85 here 45383.085
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00122 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
117
Insert offset folio 86 here 45383.086
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00123 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
118
Insert offset folio 87 here 45383.087
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00124 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
119
Insert offset folio 88 here 45383.088
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00125 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
120
Insert offset folio 89 here 45383.089
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00126 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
121
Insert offset folio 90 here 45383.090
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00127 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
122
Insert offset folio 91 here 45383.091
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00128 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
123
Insert offset folio 92 here 45383.092
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00129 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
124
Insert offset folio 93 here 45383.093
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00130 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
125
Insert offset folio 94 here 45383.094
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00131 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
126
Insert offset folio 95 here 45383.095
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00132 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
127
Insert offset folio 96 here 45383.096
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00133 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
128
Insert offset folio 97 here 45383.097
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00134 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
129
Insert offset folio 98 here 45383.098
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00135 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
130
Insert offset folio 99 here 45383.099
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00136 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
131
Insert offset folio 100 here 45383.100
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00137 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
132
Insert offset folio 101 here 45383.101
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00138 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
133
Insert offset folio 102 here 45383.102
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00139 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
134
Insert offset folio 103 here 45383.103
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00140 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
135
Insert offset folio 104 here 45383.104
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00141 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
136
Insert offset folio 105 here 45383.105
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00142 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
137
Insert offset folio 106 here 45383.106
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00143 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
138
Insert offset folio 107 here 45383.107
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00144 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
139
Insert offset folio 108 here 45383.108
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00145 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
140
Insert offset folio 109 here 45383.109
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00146 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
141
Insert offset folio 110 here 45383.110
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00147 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
142
Insert offset folio 111 here 45383.111
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00148 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
143
Insert offset folio 112 here 45383.112
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00149 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
144
Insert offset folio 113 here 45383.113
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00150 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
145
Insert offset folio 114 here 45383.114
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00151 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
146
Insert offset folio 115 here 45383.115
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00152 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
147
Insert offset folio 116 here 45383.116
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00153 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
148
Insert offset folio 117 here 45383.117
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00154 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
149
Insert offset folio 118 here 45383.118
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00155 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
150
Insert offset folio 119 here 45383.119
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00156 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
151
Insert offset folio 120 here 45383.120
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00157 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
152
Insert offset folio 121 here 45383.121
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00158 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
153
Insert offset folio 122 here 45383.122
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00159 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
154
Insert offset folio 123 here 45383.123
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00160 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
155
Insert offset folio 124 here 45383.124
VerDate Nov 24 2008 21:06 Sep 14, 2021 Jkt 095071 PO 00000 Frm 00161 Fmt 6601 Sfmt 6601 K:\DOCS\HBA181.150 TERRI
File and source
- File
- CHRG-117hhrg45383.pdf
- Size
- 13,211,376 bytes
- SHA-256
- 2e5021acf270ca02e55925b07701101a33a82340f66ef7214bf789bb507b9283
- Our copy
- CHRG-117hhrg45383.pdf
- Original
- www.govinfo.gov