Opening Statement of Commissioner Christy Goldsmith Romero at the CFTC Voluntary Carbon Markets Convening, Washington, D.C., June 2
June 02, 2022
Good morning and welcome to the CFTC. I want to thank Chairman Behnam for his leadership on climate issues. I also thank the staff for organizing this event, and thank the participants.
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.
When I testified at my confirmation hearing, I said that “As our markets evolve with emerging issues like climate, regulators must be thoughtful and deliberate. It is important to learn the facts, listen to all sides, understand consequences of any action, and collaborate with other regulators. Being thoughtful helps keep markets resilient, transparent, and free of fraud and manipulation, while promoting responsible innovation.”
Today is an opportunity to learn, listen and understand. 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 producers.
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.
I am interested in hearing what special or unique considerations, opportunities or challenges these markets present. I will be particularly interested in hearing about whether there are customer protections, standards or guardrails needed in order to achieve transparency, credibility and integrity. I am interested in thoughts on the appropriate role of the CFTC to promote responsible innovation in these markets. Finally, as the sponsor of the Technology Advisory Committee, I am interested in learning about how technology can provide an opportunity to help bring integrity that could scale up these markets.
I look forward to the discussion, and appreciate you taking the time to share your insight.