Lael Brainard: Why climate change matters for monetary policy and financial stability

Speech by Ms Lael Brainard, Member of the Board of Governors of the Federal Reserve System, at "The Economics of Climate Change", a research conference sponsored by the Federal Reserve Bank of San Francisco, San Francisco, California, 8 November 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

I want to thank my colleagues at the Federal Reserve Bank of San Francisco, especially Mary Daly, Galina Hale, Òscar Jordà, and Glenn Rudebusch, for organizing this research conference. The presentations today provide important insights into the many important ways climate-related risks may affect our financial system and broader economy.

Similar to many areas around the country, we need not look far from here to see the potentially devastating effects of our changing climate. Less than a hundred miles from here, families have lost their homes and businesses, and entire communities have been devastated by the Kincade fire. Some have described PG&E's bankruptcy as the first climate change bankruptcy. Some insurers have discontinued policies in fire-prone areas, which, in turn, is changing the costs of homeownership and the risk profiles of previously underwritten mortgages. Yet we can also see not far from here the promise of green innovation.

The Federal Reserve's Responsibilities

So how does climate change fit into the work of the Federal Reserve?