By Lise Alves, Contributing Reporter
MIAMI BEACH, FLORIDA – Natural disasters linked to climate change can have a serious impact on the economy and pose a real danger to the financial system, said a United States regulator on Wednesday.
“Assessing climate-related market risk must be a priority – and it must start now,” Rostin Behnam said on Wednesday before the Market Risk Advisory Committee (MRAC). Behnam is a commissioner at the U.S. Commodities Future Trading Commission.
The Commodities Future Trading Commission, is a regulatory committee overseeing major U.S. financial markets, including grain futures, oil trading and derivatives. “Our commodity markets and the financial markets that support them will suffer if we do not take action to mitigate the risk of contagion,” he told the other members of the Committee.
According to the regulator, most of the world’s markets and market regulators are taking steps towards assessing and mitigating the current and potential threats of climate change. “We in the U.S. must also demand action from all segments of the public and private sectors, including this agency,” he said.
For Behnam, the impacts of climate change effects every aspect of the American economy; from production agriculture to commercial manufacturing and the financing of every step in each process.
He added that any solutions seeking to address and mitigate climate risk must also be focused on ensuring the safety and continued prosperity of urban and rural communities. “Failing to address financial market risks associated with climate change will impede economic growth, and most likely hit rural communities the hardest,” he noted.
Behnam brought to the floor of the Committee data from an USDA report issued on June 2nd that flooding due to torrential rains impacted planting of major crops, such as corn. According to the USDA only 67 percent of U.S. corn for the season was planted, when until the end of May the average percentage from 2014-18 was of 96 percent.
For soybeans this season, the USDA shows only 39 percent of the crop was planted, when the average percentage for this time of year for the last four years was of 86 percent.
Behnam also noted the economic damages incurred due to climate change. “As recently as last week, heightened fire threats in northern California, at the very outset of wildfire season, brought fresh reminders of the devastation sewn across the western United States last year,” he told his colleagues.
In January, California’s electricity provider, PG&E, filed for bankruptcy due to the billions of dollars it suffered in liabilities due to last year’s deadly wildfires.
Behnam says that although risk exposures to insurance providers, asset managers, pension funds, commercial and retail banks cannot be understated, the ultimate burden is likely to fall on individuals.
“The final risk often weighs on farmers, investors, customers, consumers, and homeowners. We, collectively, must act now to address the persistent risks posed by climate change,” concluded the regulator.
Behnam’s speech before the CFTC surprised many analysts. They say that although the commission is designed to operate more independently from the White House than many federal agencies, it is still part of the federal government and as such subject to restrictions on what its members may or may not say against government policies.
Since President Donald Trump took over the presidency, the Administration has been less than willing to talk about climate change and its effects.
Since 2017, the U.S. government has withdrawn from the Paris Agreement, loosened regulations on pollution, revoked flood standards accounting for sea-level rise and removed climate change from list of national security threats.