[Federal Register Volume 87, Number 110 (Wednesday, June 8, 2022)]
[Pages 34856-34862]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-12302]



Request for Information on Climate-Related Financial Risk

AGENCY: Commodity Futures Trading Commission.

ACTION: Request for information.


SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or 
``Commission'') is seeking public responses to this Request for 
Information to better inform its understanding and oversight of 
climate-related financial risk as pertinent to the derivatives markets 
and underlying commodities markets. Public responses to this request 
will help to inform the Commission's next steps in furtherance of its 
purpose to, among other things, promote responsible innovation, ensure 
the financial integrity of all transactions subject to the Commodity 
Exchange Act, and avoid systemic risk. The information received will 
also inform the Commission's response to the recommendations of the 
Financial Stability Oversight Council 2021 Report on Climate-Related 
Financial Risk and inform the ongoing work of the Commission's Climate 
Risk Unit. The Commission may use this information to inform potential 
future actions including, but not limited to, issuing new or amended 
guidance, interpretations, policy statements, regulations, or other 
potential Commission action within its authority under the Commodity 
Exchange Act as well as its participation in any domestic or 
international fora.

DATES: Comments must be received on or before August 8, 2022.

ADDRESSES: You may submit comments, identified by the name of the 
release, ``Climate-Related Financial Risk RFI'', by any of the 
following methods:
     CFTC Comments Portal: https://comments.cftc.gov. Select 
the ``Submit Comments'' link for this release and follow the 
instructions on the Public Comment Form.
     Mail: Send to Christopher Kirkpatrick, Secretary of the 
Commission, Commodity Futures Trading Commission, Three Lafayette 
Centre, 1155 21st Street NW, Washington, DC 20581.
     Hand Delivery/Courier: Follow the same instructions as for 
Mail, above. Please submit your comments using only one of these 
methods. Submissions through the CFTC Comments Portal are encouraged.
    All comments must be submitted in English, or if not, accompanied 
by an English translation. Comments will be posted as received to 
https://comments.cftc.gov. You should submit only information that you 
wish to make available publicly. If you wish the Commission to consider 
information that you believe is exempt from disclosure under the 
Freedom of Information Act (``FOIA''), a petition for confidential 
treatment of the exempt information may be submitted according to the 
procedures established in Sec.  145.9 of the Commission's 

    \1\ 17 CFR 145.9.

    The Commission reserves the right, but shall have no obligation, to 
review, pre-screen, filter, redact, refuse or remove any or all of your 

[[Page 34857]]

from https://comments.cftc.gov that it may deem to be inappropriate for 
publication, such as obscene language. All submissions that have been 
redacted or removed that contain responses to the Request for 
Information will be retained in the public comment file and may be 
accessible under the FOIA.

FOR FURTHER INFORMATION CONTACT: Abigail S. Knauff, (202) 418-5123, 
[email protected], Deputy, Climate Risk Unit; Brigitte C. Weyls, (312) 
596-0547, [email protected], Assistant Chief Counsel, Division of Market 
Oversight; Andrew Ruggiero, (202) 379-8919, [email protected]
Attorney Advisor, Market Participants Division; Richard Haynes, (202) 
418-5063, [email protected], Deputy Director, Division of Clearing and 
Risk; Diana Dietrich, (202) 418-6767, [email protected], Senior 
Assistant General Counsel; or Mark Fajfar, (202) 418-6636, 
[email protected], Senior Assistant General Counsel, Legal Division, 
Commodity Futures Trading Commission, Three Lafayette Centre, 1151 21st 
Street NW, Washington, DC 20581.


I. Background

A. Climate-Related Financial Risks

    The effects of climate change and the transition to a low-carbon 
economy present emerging climate-related financial risks, which fall 
into two broad categories: Physical risks and transition risks.\2\ 
Physical risks generally are characterized by harm caused by acute, 
climate-related events such as hurricanes, wildfires, floods, and 
heatwaves; and chronic shifts in precipitation patterns, sea level 
rise, and ocean acidification.\3\ These extreme weather events and 
natural disasters, especially as they increase in frequency and/or 
intensity, can damage assets, disrupt operations, and increase 
costs.\4\ Transition risks generally are characterized by stresses to 
certain financial institutions or sectors that result from shifts in 
policy, regulations, customer and business preferences, technology, 
credit or insurance availability, or other market or social forces that 
can affect business operations.\5\

    \2\ E.g., Financial Stability Oversight Council (``FSOC''), 
``Report on Climate-Related Financial Risk 2021'' (Oct. 21, 2021), 
available at https://home.treasury.gov/system/files/261/FSOC-Climate-Report.pdf (``FSOC Report''), at 12.
    \3\ See Financial Stability Board (``FSB''), ``The Implications 
of Climate Change for Financial Stability (Nov. 2020),'' available 
at https://www.fsb.org/2020/11/the-implications-of-climate-change-for-financial-stability/, at 6 (``Increased physical risks could 
result in both market and credit risks to the financial system. 
Market risks--that is, the risk of reductions in the value of 
financial assets--could result in losses for banks, asset owners, 
and other financial institutions. Market risks might also emerge due 
to abrupt increases in risk premia due to uncertainty concerning 
financial assets' future payoffs. Physical risks can also give rise 
to credit losses due to reductions in the income--or reductions in 
the profitability--of borrowers.'').
    \4\ See FSOC Report at 101-02 (discussing climate change 
physical-risk implications for financial sector operations; 
regarding the potential impact of rising sea levels and increased 
flood risk in the northeastern United States, notes ``the 
concentration of sector critical infrastructure in the New York City 
metro area, . . . home to five of the current seven U.S.-based 
global systemically important banks and five of the current eight 
FSOC-designated financial market utilities'').
    \5\ Id. at 12-13. For example, economic measures that raise 
implicit carbon prices to reduce greenhouse gas (``GHG'') emissions 
could raise transition risk for suppliers and users of GHG-intensive 
production processes, products, or services. The FSOC Report notes 
that ``the financial sector may experience credit and market risks 
associated with loss of income, defaults and changes in the values 
of assets, liquidity risks associated with changing demand for 
liquidity, operational risks associated with disruptions to 
infrastructure or other channels, or legal risks.'' Id. at 13-14.

    Climate-related financial risk may directly or indirectly impact 
Commission registered entities,\6\ registrants,\7\ and other market 
participants as well as the derivatives markets and the underlying 
commodities markets themselves. Effects may include, but are not 
limited to, heightened market volatility, disruptions of historical 
price correlations, and challenges to existing risk management 
assumptions. The Commission is seeking comment on all applicable 
aspects of its existing regulatory framework and market oversight, as 
they may be affected by climate-related financial risk.

    \6\ As relevant here, a ``Registered Entity'' as defined in the 
Commodity Exchange Act (``CEA'') includes designated contract market 
(``DCM''); derivatives clearing organization (``DCO''); swap 
execution facility (``SEF''); and swap data repository (``SDR''). 
CEA sec. 1a(40), 7 U.S.C. 1a(40).
    \7\ ``Registrant'' means a commodity pool operator (``CPO''); 
commodity trading advisor (``CTA''); futures commission merchant 
(``FCM''); introducing broker (``IB''); leverage transaction 
merchant; floor broker; floor trader; major swap participant 
(``MSP''); retail foreign exchange dealer; or swap dealer (``SD'') 
that is subject to the Commission's regulations; or an associated 
person of any of the foregoing other than an associated person of a 
SD or MSP. 17 CFR 1.3 (2021).

B. Executive Order 14030

    On May, 20, 2021, President Biden signed Executive Order 14030 on 
Climate-Related Financial Risk (``Executive Order 14030''), which 
outlines a whole-of-government strategy to mitigating climate-related 
financial risk. Executive Order 14030 recognizes that the failure of 
financial institutions to appropriately and adequately account for and 
measure physical and transition risks threatens the competitiveness of 
U.S. companies and markets.\8\ Executive Order 14030 articulates a 
policy to advance the disclosure of climate-related financial risk and 
act to mitigate that risk and its drivers while achieving a net-zero 
emissions economy by 2050.\9\

    \8\ FSOC Report at section 1.
    \9\ E.O. 14030, 87 FR 27967 (May 20, 2021) (Climate-Related 
Financial Risk), at https://www.federalregister.gov/documents/2021/05/25/2021-11168/climate-related-financial-risk; see also E.O. 
14008, 86 FR 7619 (January 27, 2021) (Tackling the Climate Crisis at 
Home and Abroad), at https://www.federalregister.gov/documents/2021/02/01/2021-02177/tackling-the-climate-crisis-at-home-and-abroad; 
E.O. 13990, 86 FR 7037 (January 20, 2021) (Protecting Public Health 
and the Environment and Restoring Science to Tackle the Climate 
Crisis), at https://www.federalregister.gov/documents/2021/01/25/2021-01765/protecting-public-health-and-the-environment-and-restoring-science-to-tackle-the-climate-crisis.

    Section 3 of Executive Order 14030 directs the FSOC, of which the 
Chairman of the Commission is a voting member, to consider ``assessing, 
in a detailed and comprehensive manner, the climate-related financial 
risk, including both physical and transition risks, to the financial 
stability of the Federal Government and the stability of the U.S. 
financial system.'' \10\ Executive Order 14030 directs the FSOC to 
issue a report to the President identifying FSOC members' efforts ``to 
integrate consideration of financial risk in their policies and 
programs.'' \11\

    \10\ Executive Order 14030, 87 FR 27968.
    \11\ Id. More specifically, Executive Order 14030 directs the 
FSOC Report to include a discussion of: (A) The necessity of any 
actions to enhance climate-related disclosures by regulated entities 
to mitigate climate-related financial risk to the financial system 
or assets and a recommended implementation plan for taking those 
actions; (B) any current approaches to incorporating the 
consideration of climate-related financial risk into their 
respective regulatory and supervisory activities and any impediments 
they faced in adopting those approaches; (C) recommended processes 
to identify climate-related financial risk to the financial 
stability of the United States; and (D) any other recommendations on 
how identified climate-related financial risk can be mitigated, 
including through new or revised regulatory standards as 

C. FSOC Climate-Related Financial Risk Report Recommendations

    In response to Executive Order 14030, the FSOC issued the Climate-
Related Financial Risk Report in October 2021 with thirty-five 
recommendations for the FSOC and its member agencies to: (1) Build 
capacity and expand efforts to address climate-related financial risks; 
(2) fill climate-related data and methodological gaps; (3) enhance 
public climate-related disclosures; and (4) assess and mitigate 
climate-related risks that could threaten the stability of the 
financial system.\12\ A key recommendation is that member

[[Page 34858]]

agencies, consistent with their legal authority, ``expand their 
respective capacities to define, identify, measure, monitor, assess, 
and report on climate-related financial risks and their effects on 
financial stability.'' \13\ The Commission is seeking information and 
feedback on how, consistent with its statutory authority, it may 
responsibly act on the FSOC Report's recommendations. The Commission is 
also seeking information to better inform any actions it may undertake 
in the future to address climate-related financial risk.

    \12\ FSOC Report at 5-9.
    \13\ Id. at 5 (Recommendation 1.3).

D. Commodity Exchange Act and Commission Regulations

    The derivatives markets that the Commission oversees pursuant to 
the CEA are ``affected with a national public interest'' because they 
facilitate risk management and price discovery ``through trading in 
liquid, fair and financially secure trading facilities.'' \14\ The 
purpose of the CEA is to serve this public interest through ``a system 
of effective self-regulation of trading facilities, clearing systems, 
market participants and market professionals under the oversight of the 
Commission.'' \15\ The Commission's purpose also includes deterring 
disruptions to market integrity, ensuring the financial integrity of 
transactions, avoiding systemic risk, and promoting responsible 
innovation and fair competition.\16\ In its oversight of these 
derivatives markets, the Commission establishes appropriate tolerances 
and guardrails to minimize market disruptions and promote a level 
playing field.

    \14\ CEA sec. 3(a), 7 U.S.C. 5(a).
    \15\ CEA sec. 3(b), 7 U.S.C. 5(b).
    \16\ Id.

    The Commission's regulations apply to various derivatives market 
participants, including, but not limited to, DCMs,\17\ SEFs,\18\ 
SDRs,\19\ DCOs,\20\ FCMs,\21\ IBs,\22\ SDs,\23\ MSPs,\24\ CPOs,\25\ and 
CTAs.\26\ The Commission is seeking comment to consider how climate-
related financial risk may affect any of its registered entities, 
registrants, or other market participants, and the soundness of the 
derivatives markets. This includes assessing how registrants and 
registered entities may need to adapt their risk management 
frameworks--including, but not limited to, margin models, scenario 
analysis, stress-testing, collateral haircuts, portfolio management 
strategies, counterparty and third-party service provider risk 
assessments, and enterprise risk management programs--as well as how 
market participants may need to adapt their dealing, trading, and 
advisory businesses in the derivatives markets. The Commission is also 
seeking comment to understand how market participants use the 
derivative markets to hedge and speculate on various aspects of 
physical and transition risk, as they exist today and as they may 
evolve in the future.\27\ The Commission aims to consider how it may 
need to adapt its oversight of the derivatives markets, including any 
new or amended derivative products created to hedge climate-related 
financial risk.

    \17\ CEA sec. 5, 7 U.S.C. 7; 17 CFR part 38.
    \18\ CEA secs. 1a(50), 5h, 7 U.S.C. 1a(50), 7b-3; 17 CFR part 
    \19\ CEA secs. 1a(48), 21, 7 U.S.C. 1a(48), 24a; 17 CFR part 49.
    \20\ CEA secs. 1a(15), 5b, 7 U.S.C. 1a(15), 7a-1; 17 CFR part 
    \21\ CEA secs. 1a(28), 4f, 7 U.S.C. 1a(28), 6f; 17 CFR 3.10.
    \22\ CEA secs. 1a(31); 17 CFR part 1.
    \23\ CEA secs. 1a(49), 4s, 7 U.S.C. 1a(49), 6s; 17 CFR 3.10, 
part 23.
    \24\ CEA secs. 1a(33), 4s, 7 U.S.C. 1a(33), 6s; 17 CFR 3.10, 
part 23.
    \25\ CEA secs. 1a(11), 4k, 7 U.S.C. 1a(11), 6k; 17 CFR 3.10, 
part 4.
    \26\ CEA secs. 1a(12), 4k, 7 U.S.C. 1a(12), 6k; 17 CFR 3.10, 
part 4.
    \27\ See Rostin Behnam, Chairman, CFTC, Keynote Address at the 
FIA Boca 2022 International Futures Industry Conference, Boca Raton, 
Florida (Mar. 16, 2022), at https://www.cftc.gov/PressRoom/SpeechesTestimony/opabehnam21.

    The Commission is considering climate-related financial risk 
through various workstreams in addition to its FSOC participation. 
Commission staff members participate on the FSOC's Climate-Related 
Financial Risk Committee, including its scenario analysis and risk 
assessment working groups. Commission staff members also participate on 
Treasury's Financial Literacy and Education Commission Study on Climate 
Change and the Financial Resilience of American Households and 
Communities. Chairman Rostin Behnam serves as co-chair of the Carbon 
Markets Workstream within the International Organization of Securities 
Commissions' Sustainable Finance Task Force.\28\ Agency participation 
in these initiatives is largely staffed from the Commission's Climate 
Risk Unit, an interdivisional staff group led by the Office of the 
Chairman that was formed ``to focus on the role of derivatives in 
understanding, pricing, and mitigating climate-related risk, and 
supporting the orderly transition to a low-carbon economy through 
market-based initiatives.'' \29\

    \28\ Press Release, International Organization of Securities 
Commissions, IOSCO's 2022 Sustainable Finance work plan strengthens 
the organization's commitment to increasing transparency and 
mitigating greenwashing (Mar. 14, 2022), at https://www.iosco.org/news/pdf/IOSCONEWS635.pdf.
    \29\ Rostin Behnam, Chairman, CFTC, State of the CFTC, Testimony 
Before the H. Comm. on Agric, 117 Cong. (Mar. 31, 2022), at https://www.cftc.gov/PressRoom/SpeechesTestimony/opabehnam22; see also Press 
Release Number 8368-21, CFTC, ``CFTC Acting Chairman Behnam Creates 
New Climate Risk Unit'' (Mar. 17, 2021), at https://www.cftc.gov/sites/default/files/2020-09/9-9-20%20Report%20of%20the%20Subcommittee%20on%20Climate-Related%20Market%20Risk%20-%20Managing%20Climate%20Risk%20in%20the%20U.S.%20Financial%20System%20for%20posting.pdf.

II. Request for Information

    The Commission is seeking public feedback on all aspects of 
climate-related financial risk as it may pertain to the derivatives 
markets, underlying commodities markets, registered entities, 
registrants, and other related market participants. In addition to any 
general input, the Commission is interested in responses to the 
questions posed below. The Commission may use this information to 
inform potential future actions including, but not limited to, the 
issuance of new or amended guidance, interpretations, policy 
statements, or regulations, or other potential Commission action. The 
Commission welcomes any relevant comments, including on related topics 
that may not be specifically mentioned but that a commenter believes 
should be considered.


    1. What types of data would help the Commission evaluate the 
climate-related financial risk exposures of registered entities, 
registrants, and other participants in the derivative markets that the 
Commission oversees? Are there data sources that registered entities, 
registrants, and/or other market participants currently use to 
understand and/or assess climate-related financial risk? What steps 
should the Commission consider in order to have better access to 
consistent and reliable data to assess climate-related financial risks?
    2. Would it help the Commission, registered entities, registrants, 
market participants and/or the public to understand and/or to manage 
climate-related financial risk if Commission reporting requirements 
included information about climate-related aspects of listed 
derivatives products, reported transactions, and/or open positions? Are 
there data standards or definitions that the Commission should consider 
incorporating into any such reporting?
    3. What steps should the Commission consider to better inform the 
public of its efforts to assess and address climate-

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related financial risks? What information could the Commission publish 
that would be useful in this regard? What steps should the Commission 
consider to make climate-related data more available to registrants, 
registered entities, other market participants, and/or the public (as 
appropriate and subject to any applicable data confidentiality 
requirements) in order to help understand and/or manage climate-related 
financial risk?

Scenario Analysis and Stress Testing

    4. Are there any climate forecasts, scenarios, or other data tools 
that would be useful to the Commission, registered entities, and/or 
registrants to better understand the exposure of any registered 
entities or registrants to climate-related financial risk and how those 
risks translate to economic and financial impacts?
    5. Are there any common scenarios, in addition to the scenarios 
developed by the Network for Greening the Financial System \30\ and/or 
the Financial Stability Board,\31\ that the Commission should consider 
incorporating into its oversight, and/or consider for registered 
entities and/or registrants?

    \30\ Network for Greening the Financial System, ``NGFS Climate 
Scenarios for Central Banks and Supervisors'' (June 2020), available 
at https://www.ngfs.net/sites/default/files/medias/documents/820184_ngfs_scenarios_final_version_v6.pdf.
    \31\ See generally Financial Stability Board, ``Supervisory and 
Regulatory Approaches to Climate-Related Risks Interim Report'' 
(Apr. 29, 2022), https://www.fsb.org/wp-content/uploads/P290422.pdf.

    6. Is a long-term (e.g., 30-year or 50-year) stress testing 
scenario relevant for derivatives markets subject to CFTC oversight? Is 
there a more relevant set of forward-looking climate relevant 
scenarios? Should these scenarios account for geographical stress? 
Should these scenarios try to target certain asset types? Can scenarios 
be customized to be more relevant for certain types of derivatives 
markets or registered entities?
    7. Should registered entities and registrants be required to 
incorporate climate stress tests into their risk management processes? 
Do registered entities and registrants have the capability currently to 
conduct climate-related stress tests? If not, what would be needed in 
order to achieve this capability and on what timeline?

Risk Management

    8. How might registered entities and/or registrants need to adapt 
their risk management frameworks--including, but not limited to, margin 
models, scenario analysis, stress-testing, collateral haircuts, 
portfolio management strategies, counterparty and third-party service 
provider risk assessments, and/or enterprise risk management programs--
to address climate-related financial risk?
    9. Are there ways in which the Commission's existing regulations 
and/or guidance could better address climate-related financial risk, 
including credit risks, market risks, counterparty risks, and other 
financial and operational risks? Are there ways in which the 
Commission's regulations and/or guidance relating to risk management, 
system safeguards, business continuity, governance, recordkeeping, and/
or internal audit could better address such risk?
    10. Could the Commission's existing regulations and guidance better 
clarify expectations regarding management of climate risks, taking into 
account a registered entity's or registrant's size, complexity, risk 
profile, and existing enterprise risk management processes? Would it be 
helpful for the Commission to promulgate regulations or issue guidance 
for registrants and/or registered entities regarding the implementation 
of policies and procedures to measure, track, and account for physical 
and transition risk?
    11. DCOs' risk management frameworks focus on market risk aspects 
with add-ons for liquidity, concentration, wrong way risk, settlement 
risk as well other asset class appropriate risks. Should these risk 
management frameworks directly incorporate climate-related risk 
specific to clearing member firms, or their clients' climate-related 
risks, and, if so, how?
    12. Should the Commission consider amending its minimum capital and 
liquidity requirements to better recognize climate-related risks?


    13. The Commission staff is evaluating the Commission's public 
disclosure, including public information, requirements to assess 
whether existing requirements need to be updated to effectively provide 
decision-useful, consistent, and comparable information on climate-
related risks. Are there ways in which updated disclosure requirements 
could aid market participants in better assessing climate-related 
    14. A goal of climate-related financial disclosure is to offer 
meaningful information about climate-related financial risks, and to 
foster increased transparency into those risks. In connection with any 
assessment of whether updated requirements are needed, what specific 
disclosures, building on the Task Force on Climate-Related Financial 
Disclosures' (``TCFD'') four core elements of governance, strategy, 
risk management, and metrics and targets,\32\ would be most helpful for 
the Commission to consider?

    \32\ Task Force on Climate-Related Financial Disclosures, 
https://www.fsb-tcfd.org/ (last visited May 13, 2022).

    15. Should the Commission, consistent with its statutory mandate 
and regulatory authority, consider the establishment by registrant 
category (e.g., CPOs, CTAs, FCMs, IBs, and SDs) of climate-related risk 
disclosure requirements based on the TCFD's four core elements?
    16. Are there any standardized data formats, such as structured 
data, that the Commission should consider for public climate-related 
data disclosures? Would the use of complementary protocols, where 
applicable, be helpful for comparability across other regulatory 
    17. FSOC Report Recommendation 3.4 \33\ suggests that FSOC members 
issuing requirements for climate-related disclosures consider whether 
such disclosures should include GHG emissions, as appropriate and 
practicable, to help determine exposure to material climate-related 
financial risks. Should registered entities and registrants be required 
to disclose information relating to GHG emissions?

    \33\ FSOC Report at 7.

Product Innovation

    18. What derivatives products are currently used to manage climate-
related financial risk, facilitate price discovery for climate-related 
financial risk, and/or allocate capital to climate-benefiting projects? 
Please explain how these products are used, negotiated, and traded. 
What, if any, conditions, including market practices and/or regulatory 
requirements, may constrain or promote their expanded use or 
development to address climate-related financial risk? Are there ways 
in which Commission regulations or guidance could better address 
particular considerations relating to the listing of these types of 
products for trading?
    19. Are there customer protections or other guardrails that the 
Commission could consider to promote market integrity in climate-
related derivatives products?
    20. Are there any potential innovations in climate-risk-related 
technology that could shape derivatives product innovation or are 
otherwise likely to impact the derivatives markets overseen by the 

[[Page 34860]]

    21. Are the pricing and terms of climate-related derivatives 
products affected by or related to the pricing and terms of other 
products? Are climate-related derivatives products effective hedges for 
a portion of the risks related to transactions in commodities other 
than the commodities underlying the derivative products? Are there any 
climate-risk factors that will specifically affect derivatives products 
and their respective underlying commodities that should be addressed 
within the Commission's regulations, guidance, or oversight of these 

Voluntary Carbon Markets

    22. Are there way in which the Commission could enhance the 
integrity of voluntary carbon markets and foster transparency, 
fairness, and liquidity in those markets?
    23. Are there aspects of the voluntary carbon markets that are 
susceptible to fraud and manipulation and/or merit enhanced Commission 
    24. Should the Commission consider creating some form of 
registration framework for any market participants within the voluntary 
carbon markets to enhance the integrity of the voluntary carbon 
markets? If so, what would a registration framework entail?

Digital Assets

    25. Are digital asset markets creating climate-related financial 
risk for CFTC registrants, registered entities, other derivatives 
market participants, or derivatives markets? Are there any aspects of 
climate-related financial risk related to digital assets that the 
Commission should address within its statutory authority? Do digital 
assets and/or distributed ledger technology offer climate-related 
financial risk mitigating benefits?

Financially Vulnerable Communities

    26. Consistent with the CFTC's statutory mandate and regulatory 
authority, what factors are important, when the Commission analyzes 
climate-related financial risks, to better understand the impacts on 
households and communities?
    27. Consistent with the CFTC's statutory mandate and regulatory 
authority, are there any climate-related financial impacts or potential 
policy solutions addressed to climate-related financial impact that the 
Commission should consider as it pertains to financially vulnerable 
populations in particular? Are there any steps that the Commission 
should consider when assessing how the impact of climate change on the 
derivatives markets and/or underlying commodities markets, or proposed 
policy solutions to address such impact, may affect financially 
vulnerable populations?

Public-Private Partnerships/Engagement

    28. What mechanism(s), if any, would be useful for the Commission 
to employ to foster public-private partnerships to address climate-
related financial risk within the derivatives markets?
    29. Are there experts with whom it would be useful for Commission 
staff to collaborate to identify climate forecasts, scenarios, and 
other tools necessary to better understand the exposure of registered 
entities and registrants to climate-related financial risks and how 
those risks translate into economic and financial impacts?
    30. What specific literature and research should the Commission 
review and consult related to climate risks as applicable to the 
derivative markets, underlying commodities markets, registrants, 
registered entities, or other derivatives market participants?
    31. During the IBOR transition, the Alternative Reference Rate 
Committee was formed, in part, to identify best practices for 
robustness of inter-bank offered rates. Would the formation of a 
similar standard-setting committee be useful in the development of 
climate-related indices designed for mitigation of the long-term risks 
of climate change, such as temperature and sea level rise or carbon 
concentration within the atmosphere, or the development of other 
standards or best practices?
    32. Assuming a standard setting committee or other body could 
generate information to improve the hedging utility of long-dated 
climate risk derivative products, what sort of impact might that have 
on liquidity in those products, what benefits might be realized by 
market participants, and could one expect a material improvement in 
price discovery for long-term climate risk, in general?

Capacity and Coordination

    33. What steps should the Commission consider in order to expand 
its capacity to define, identify, measure, monitor, assess, and report 
on climate-related financial risks and their effects on financial 
stability? For example, what factors should the Commission consider 
when it looks to prioritize staffing, training and expertise on 
climate-related issues? Which analytic, data modeling, and monitoring 
methodologies would be helpful to the Commission in this regard?
    34. How should the Commission coordinate its efforts with 
international groups and other regulatory bodies and supervisors? Are 
there standards, definitions, or metrics that could facilitate the 
sharing of relevant climate-related information amongst regulatory 
bodies and supervisors, and/or their analyses and aggregation of 
climate-related data? Are there specific steps that could be taken to 
enhance global coordination and regulatory comity?

    Issued in Washington, DC, on June 2, 2022, by the Commission.
Christopher Kirkpatrick,
Secretary of the Commission.

Appendices To Request for Information on Climate-Related Financial 
Risk--Commission Voting Summary and Commissioners' Statements

Appendix 1--Commission Voting Summary

    On this matter, Chairman Behnam and Commissioners Johnson and 
Goldsmith Romero voted in the affirmative. Commissioners Mersinger 
and Pham concurred. No Commissioner noted in the negative.

Appendix 2--Statement of Support of Commissioner Kristin N. Johnson

    According to data gathered by the National Oceanic and 
Atmospheric Administration's (NOAA's) National Centers for 
Environmental Information, since 1980, the United States has 
sustained more than three hundred weather and climate disasters, 
including droughts, floods, severe storms, cyclones, wildfires, and 
winter storm events that, in the aggregate, led to costs or damage 
exceeding more than $1 billion.\1\ Notwithstanding our long history 
of navigating severe-weather related events, the increasing 
frequency, severity, and intensity as well as the rising costs of 
these events raise important questions and remarkable concerns.

    \1\ NOAA, ``Billion-Dollar Weather and Climate Disasters: 
Overview,'' available at https://www.ncdc.noaa.gov/billions/.

    In May of 2021, President Biden issued an Executive Order on 
Climate-Related Financial Risk \2\ directing the Secretary of the 
Treasury to engage with Financial Stability Oversight Council (FSOC) 
members to consider issuing a report on member agencies' efforts to 
consider climate-related financial risk. In response to the 
Executive Order, the FSOC issued the Report on Climate-Related 
Financial Risk (Report).\3\ The Report contains thirty-five 
recommendations aimed to:

    \2\ Executive Order 14030 of May 20, 2021, Climate-Related 
Financial Risk, 86 FR 27967 (May 25, 2021).
    \3\ Financial Stability Oversight Council, ``Report on Climate-
Related Financial Risk 2021'' (Oct. 21, 2021), available at https://home.treasury.gov/system/files/261/FSOC-Climate-Report.pdf.

    (1) Build capacity and expand efforts to address climate-related 
financial risks;
    (2) Fill climate-related data and methodological gaps;
    (3) Enhance public climate-related disclosures; and

[[Page 34861]]

    (4) Assess and mitigate climate-related risks that could 
threaten the stability of the financial system.
    Today's Request for Information on Climate-Related Financial 
Risk (RFI) reflects the CFTC's established leadership in response to 
requests to better understand the role of voluntary carbon markets 
as well as the agency's commitment to ensuring a comprehensive 
effort to understand how our markets, market participants, including 
large and small agricultural and energy sector commercial and end 
users may be impacted by physical risks or acute climate-related 
events and transition risks or the stresses that result from shifts 
in policies, regulations, customer preferences, and technology. 
Consistent with the CFTC's mandate to promote the integrity, 
resilience, and vibrancy of the U.S. derivatives markets through 
sound regulation, the RFI seeks comments on how climate-related 
financial risk may affect ``registered entities, registrants, or 
other market participants, and the soundness of the derivatives 
markets,'' including an assessment of ``how registrants and 
registered entities may need to adapt their risk management 
frameworks--including, but not limited to, margin models, scenario 
analysis, stress-testing, collateral haircuts, portfolio management 
strategies, counterparty and third-party service provider risk 
assessments, and enterprise risk management programs--as well as how 
market participants may need to adapt their dealing, trading, and 
advisory businesses in the derivatives markets.''
    These inquiries are well within the ambit of the CFTC's 
statutory authority and continue a long-established tradition of 
engaging in thoughtful dialogue with our market participants and 
diverse stakeholders in order to understand their concerns related 
to emerging and evolving risk management oversight. Among many 
complimentary and comprehensive efforts, careful evaluation of 
carbon markets may reveal a useful path for mitigating climate-
related financial risk. This RFI is an important step toward 
learning from our market participants how these markets may help 
them to hedge and efficiently manage existing and evolving climate-
related risk. Consequently, I support the Commission's RFI on 
Climate-Related Financial Risk and I look forward to the public 

Appendix 3--Statement of Support of Commissioner Christy Goldsmith 

    As expressed in President Biden's Executive Order on Climate-
Related Financial Risk, a whole-of-government approach will lead to 
greater understanding of the financial risks that climate change 
poses, and to the development of effective strategies to mitigate 
those risks. The CFTC should be at the forefront of financial 
regulatory efforts to understand, and identify actions to mitigate, 
climate-related financial risks that impact CFTC-regulated markets. 
This Request for Information reflects the Financial Stability 
Oversight Council's recommendations for U.S. financial regulators, 
seeks climate-related data, and asks questions about the appropriate 
role of the CFTC in this emerging space.\1\

    \1\ Financial Stability Oversight Council, ``Report on Climate-
Related Financial Risk 2021'' (Oct. 21, 2021), available at https://home.treasury.gov/system/files/261/FSOC-Climate-Report.pdf.

    I support the Commission's Request for Information because it 
seeks public input on both physical risks and transition risks 
related to climate issues that impact our markets. First, the 
Commission can benefit significantly in understanding physical 
climate risk directly from those in our markets who bear the risk. 
Second, the United States has an opportunity to be a leader in 
emerging voluntary carbon/sustainability markets, and public input 
can help realize that opportunity.
    As a market regulator, the CFTC's mission is to promote the 
resilience, vibrancy and integrity of our derivatives markets. 
Commodities markets have been impacted by significant climate 
disasters such as wildfires, hurricanes, flooding, and other 
disaster events that have caused devastating financial losses to 
farmers, ranchers, and producers--losses that impact our derivatives 
markets. In determining how to promote the resilience and vibrancy 
of these markets, it is appropriate for the Commission to seek data 
and input on climate-related physical risk from those in our markets 
who bear the brunt of that risk as well as the public. The 
Commission should be thoughtful and deliberate in any future action, 
and consider potential consequences on farmers, ranchers, and 
    Additionally, the Commission's role extends to promoting 
responsible innovation, which includes the evolution of climate/
sustainability products in our markets. There is a growing global 
market demand for derivatives products that could serve as a hedge 
against both physical risks of climate change as well as transition 
risks as companies move toward a net zero environment. With a 
growing number of companies making net zero pledges, there is 
notable interest in carbon offset or sustainability products. 
However, concerns about transparency, credibility, and greenwashing 
may hamper the integrity and growth of these markets. I look forward 
to public input on whether there are customer protections, 
guardrails or standards that the Commission should consider as part 
of its mission to promote market integrity and transparency and to 
keep our markets free of fraud and manipulation. The Commission has 
a critical role to play to ensure that our markets remain the 
strongest and safest in the world.

Appendix 4--Concurring Statement of Commissioner Summer K. Mersinger

    For the purpose of engaging the public through this Request for 
Information (``RFI''), I concur because I will always support 
efforts to engage market participants, industry, and the general 
public in the policy-making process at the Commodity Futures Trading 
Commission (``CFTC'' or ``Commission''). While other agencies may 
take liberties with process in order to impose a ``government-knows-
best'' approach, traditionally, the CFTC has not been that agency.
    However, I do not want my concurrence to be mistaken for support 
of the substance of this RFI or all the questions being asked. I 
have strong concerns with the discussion and several of the 
questions included in the RFI that extend beyond the scope of our 
statutory jurisdiction. Asking these questions causes confusion as 
to the role that Congress has tasked the CFTC to perform in our 
governing statute, the Commodity Exchange Act (``CEA''). Clarity 
about our statutory jurisdiction is foundational to our ability to 
successfully achieve the mission that Congress has set for the CFTC 
in the CEA.
    Reading the RFI, I was struck by the lack of concern or interest 
in legacy agriculture contracts and futures markets. Growing up, I 
watched drought, flooding, and violent weather destroy our 
livelihood in a matter of hours. I remember many mornings riding in 
my Dad's truck, surveying what was left of our corn fields after a 
hail storm, or seeing the burnt spikes of the wheat that turned too 
soon because of extreme heat and lack of rain. The financial risk of 
climate and extreme weather is and has always been real, and our 
farmers and ranchers have been using legacy agriculture contracts 
and the futures markets to hedge those risks since the inception of 
those markets.
    With this in mind, where are the questions in this RFI about 
financial risk due to climate change on our legacy agriculture 
contracts and futures markets? What is not asked in this RFI is just 
as important as what is asked. Not one question focuses on the 
agricultural sector. Is this an unintentional oversight or a 
strategic decision to cut agriculture from this conversation? 
Unfortunately, the RFI gives no reason for leaving agriculture out 
of the discussion when our agency's roots and history are embedded 
in the agriculture community.
    With respect to what is asked in the RFI, information is only 
useful if it can further our efforts to achieve our mission, which 
is why I find it concerning that we are requesting information that 
we cannot use and not asking questions on well-functioning markets 
where climate risk is already hedged. I can only conclude that the 
RFI reflects either inadvertent ``mission creep'' at best, or a 
power grab to expand the CFTC's authority at worst.
    Specific instances in which the RFI extends beyond the CFTC's 
jurisdictional boundaries under the CEA include, but are not limited 
to, the following:
     The first sentence of Section II (which sets out the 
requests for information) states that the Commission ``is seeking 
public feedback on all aspects of climate-related financial risk as 
it may pertain to the derivatives markets, underlying commodities 
markets, registered entities, registrants, and other related market 
participants.'' \1\ Let me be crystal clear: The CFTC does not 
regulate commodities markets. The CEA provides the CFTC with 
statutory authority to regulate only derivatives markets, not 
commodities markets. Requesting feedback on all aspects of climate-
related financial risk as it may pertain to underlying commodities 

[[Page 34862]]

covers a huge expanse of territory that is far outside the CFTC's 
statutory authority over derivatives markets under the CEA.

    \1\ All italics in quotations from the RFI are added, unless 
otherwise noted.

     Request no. 3 asks what steps the Commission should 
consider, in addition to publishing information in its possession, 
``to make climate-related data more available to registrants, 
registered entities, other market participants, and/or the public 
(as appropriate and subject to any applicable data confidentiality 
requirements) in order to help understand and/or manage climate-
related financial risk?'' This suggests that the CFTC has statutory 
authority under the CEA to order, as it deems appropriate, any 
individual or entity to make data available for the benefit of 
registrants, registered entities, other market participants, and/or 
the public. It does not.
     Request no. 18 asks what derivatives products ``are 
currently used to manage climate-related financial risk, facilitate 
price discovery for climate-related financial risk, and/or allocate 
capital to climate-benefiting projects?'' In Section 3(a) of the 
CEA, Congress found that the derivatives transactions regulated by 
the CFTC provide ``a means for managing and assuming price risks 
[and] discovering prices . . .'' In Section 3(b) of the CEA, 
Congress then identified the CEA's purposes as including deterring 
and preventing manipulation or other market disruptions; ensuring 
the financial integrity of transactions; avoiding systemic risk; 
protecting market participants from fraud, abusive sales practices, 
and misuses of customer assets; and promoting responsible innovation 
and fair competition.\2\ Nowhere in the CEA did Congress suggest 
that it is a purpose of the CEA, or the mission of the CFTC, to 
allocate capital--whether to climate-benefiting projects or 

    \2\ CEA sections 3(a), 3(b), 7 U.S.C. 5(a), 5(b).

     Request no. 24 asks whether the Commission should 
consider ``creating some form of registration framework for any 
market participants within the voluntary carbon markets to enhance 
the integrity of the voluntary carbon markets?'' The CFTC does not 
have statutory authority under the CEA to create a registration 
framework for market participants within voluntary carbon markets 
unless they engage in activities relating to derivatives.
     Request no. 25 asks whether ``digital assets and/or 
distributed ledger technology offer climate-related financial risk 
mitigating benefits?'' The CFTC does not have statutory authority 
under the CEA to regulate digital assets or distributed ledger 
technology except to the extent they involve derivatives.
     Request no. 27 asks whether there are ``any steps that 
the Commission should consider when assessing how the impact of 
climate change on the derivatives markets and/or underlying 
commodities markets, or proposed policy solutions to address such 
impact, may affect financially vulnerable populations?'' The CFTC 
does not have authority under the CEA to take any regulatory steps 
with respect to underlying commodities markets, regardless of 
whether they affect financially vulnerable populations.
     Request no. 30 asks what literature and research the 
Commission should consult ``related to climate risks as applicable 
to the derivatives markets, underlying commodities markets, 
registrants, registered entities, or other derivatives market 
participants?'' As noted above, Congress has not provided the CFTC 
with regulatory authority in the CEA with respect to climate risks 
applicable to underlying commodities markets.
    I have no opposition to requesting the information we need to 
consider the implications of climate-related financial risk in 
fulfilling our mission under the CEA. But I am concerned that 
requesting information on matters over which the CFTC has no 
statutory authority and ignoring opportunities to ask questions of 
market participants already using our markets to hedge their climate 
exposure will not further the purported goal of this RFI.

Appendix 5--Concurring Statement of Commissioner Caroline D. Pham

    I respectfully concur with the publication of the Request for 
Information (RFI) on Climate-Related Financial Risk in the Federal 
Register because it is imperative that the public has an opportunity 
to provide input and share expertise.
    In our work in this area, however, we must be mindful of our 
statutory mandate: oversight of the commodity derivatives 
markets.\1\ In particular, as the RFI recognizes, our markets are 
``affected with a national public interest'' because they facilitate 
risk management and price discovery ``through trading in liquid, 
fair and financially secure trading facilities.'' \2\ Further, as 
the RFI also recognizes, the Commodity Exchange Act mandates that 
the Commission serve this public interest through our oversight of 
``a system of effective self-regulation of trading facilities, 
clearing systems, market participants and market professionals,'' 
and by deterring and preventing price manipulation and other 
disruptions to market integrity, ensuring the financial integrity of 
transactions in our markets, avoiding systemic risk, protecting 
market participants from ``fraudulent or other abusive sales 
practices and misuses of customer assets,'' and promoting 
``responsible innovation and fair competition.'' \3\ This statutory 
mandate bears repeating because it makes clear that the Commission 
is a market regulator over our markets and products, market 
infrastructure, market integrity, market conduct, market 
participants, and market professionals.

    \1\ Commodity Exchange Act (``CEA'') section 2(a)(1)(A), 7 
U.S.C. 2(a)(1)(A).
    \2\ CEA section 3(a), 7 U.S.C. 5(a).
    \3\ CEA section 3(b), 7 U.S.C. 5(b).

    We are not, for instance, a prudential banking regulator like 
the Fed, OCC, or FDIC, nor are we a primarily disclosures-based 
market regulator like the SEC. Keeping our focus on our markets, 
products, and purpose--keeping our eyes on the ball--will help us 
avoid the risk of diluting our limited resources and potentially 
straying from our core expertise and responsibilities into areas 
already tasked to others.
    As we do our work on climate-related financial risks within our 
statutory authority--such as by fostering the development of new 
products and markets to manage physical risk and transition risk--we 
also should be thoughtful when considering the steps we take. Any 
actions that may impose new obligations and costs on our market 
participants, especially end-users that rely upon our markets for 
hedging, must be balanced and carefully considered.
    For registrants that have other regulators and are already 
subject to climate risk management frameworks, we should seek to 
harmonize from the start with existing prudential and other 
regulatory regimes in order to be efficient and avoid imposing 
duplicative or unnecessarily burdensome and complex requirements.
    And most importantly, I caution that for any potential future 
Commission action, we must take care to consider the impact on small 
entities and evaluate alternatives that would accomplish the 
objectives of any potential rule without unduly burdening the 
substantial numbers of growers, producers, and other end-users who 
depend on our markets for risk management and price discovery.\4\ 
That is, after all, the original purpose of our markets and the 

    \4\ See Regulatory Flexibility Act (RFA) of 1980 (5 U.S.C. 601-
612), as amended by the Small Business Regulatory Enforcement 
Fairness Act (SBREFA) of 1996, Public Law 104-121, 110 Stat. 857 
(codified at 5 U.S.C. 601 et seq.).

[FR Doc. 2022-12302 Filed 6-7-22; 8:45 am]