USA Law and Practice Contributed by: Edward P. O’Keefe, Neil T. Bloomfield, John A. Stoker and Kathryn (Kate) G. Wellman, Moore & Van Allen, PLLC
• the risks, with actual or potential material impact, to the company’s business model and strategy, any steps taken to mitigate those risks, and any material expenditures incurred and impacts on financial estimates and assumptions stemming from those risk mitigation activities; • the role of the company’s board and senior management in overseeing and manag - ing, respectively, climate-related risks and the company’s risk management processes related to these risks; • any climate-related targets or goals and any material impact on the company’s business or financial condition; and • costs, expenditures and losses related to severe weather events and impact on any estimates and assumptions the company uses to produce its financial statements if materially impacted by severe weather events. Certain covered companies are also subject to disclosures on designated emissions. The rule has a phased-in compliance period beginning in fiscal year 2025. At the state level, California has climate-related disclosure laws that require covered US com - panies that do business in California to dis - close certain greenhouse gas emissions and to publicly disclose, on a biennial basis, their cli - mate-related financial risks and any measures adopted by the company to mitigate or adapt to those risks. New York and other states have also adopted similar climate risk disclosure regimes. Conversely, some states have taken legislative steps to counter ESG principles. For instance, Florida enacted legislation requiring that the state’s chief financial officer make investment decisions without ESG considerations.
During 2023, the Federal Reserve Board con - ducted a pilot climate scenario analysis exer - cise involving six large banks. The purpose of the pilot was to enhance the ability of both banks and supervisors to measure and manage the financial risks of climate change. In May 2024, the Federal Reserve Board published a sum - mary setting out how banks are using scenario analysis to assess the resiliency of their busi - ness models to climate risks and also set out the data and modelling challenges the banks faced in conducting their impact assessments. The Federal Reserve Board is expected to continue working with these institutions on their capabili - ties to manage climate-related risks. The FDIC, the Federal Reserve Board, and OCC have also published principles for large institu - tions to manage climate risks. The principles apply to financial institutions with over USD100 billion in total assets and provide a framework for the management of exposures to climate- related financial risks. The principles address the following: • the role of the board of directors and man - agement in managing climate-related risks; • the need to reflect characteristics of climate risk into policies, procedures, and limits; • the incorporation of climate-related risks into business strategy, risk appetite, and financial, capital, and operational planning; • the development and integration of processes to integrate climate-related financial risk exposures into the bank’s existing risk man - agement framework; • the incorporation of climate-related financial risk information into data aggregation, risk measurement, and reporting; and • the development of scenario analysis to assess the potential impact on the bank of
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