On Oct. 9, the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) announced they will withdraw the Principles for Climate-Related Financial Risk Management for Large Financial Institutions. The principles were issued in 2023 to help large banks assess and manage climate-related financial risks. The agencies said they “do not believe principles for managing climate-related financial risk are necessary,” adding that institutions should instead focus on identifying and managing material financial risks through existing supervisory expectations. 

Why does it matter?

The withdrawal marks a reversal from climate-risk guidance under the Biden administration. Regulators indicated that emphasizing climate could distract from broader financial risk management, signaling a renewed focus on traditional prudential oversight.

What’s the background?

The principles, finalized in October 2023 under the Biden administration, were issued to help large banks manage climate-related financial risks such as extreme weather, energy-transition pressures, and regulatory change. Regulators said the policy aimed to ensure institutions considered long-term physical and transition risks within existing safety and soundness frameworks. 

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