In an extensive report released on June 27, the U.S. Department of Treasury called on insurers and state regulators to ramp up their efforts to evaluate risks posed by climate change. The report stating that global warming presents “new and increasingly significant challenges for the insurance industry.”

Participants in the Federal Reserve’s climate stress test pilot program—Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo—have received instructions on how the program will be conducted and what information will be gathered. The exercise, which follows the Fed’s September 30 announcement, will run until the July 31. The pilot program takes a two-prong approach, the first of which addresses the impact of physical risk—floods, wildfires, hurricanes—on assets in their commercial and residential real estate portfolios.

In late July twenty members of Congress submitted a bipartisan letter to the Securities and Exchange Commission (SEC) regarding its enforcement of Rule 15c2-11 and the negative implications for 144A debt offerings.

Following advocacy efforts by SFA and others, the SEC is providing additional time for the public to comment on recent rule proposals. Three SEC rule proposals—Regulation ATS proposed in November, amendments to the Investment Advisers Act for private fund advisers proposed in February, and most recently corporate disclosures of climate-change risks—were each originally opened to only a 30-day response period.

On May 9, SFA submitted a comment letter in response to the SEC’s request for comments on their cybersecurity disclosure proposal. In our letter, SFA highlights that the proposal is focused almost exclusively on corporate registrants, ignoring extensive fundamental and technical differences between the potential impact of cybersecurity risks and incidents on investors in corporate securities versus ABS. Because of this, we recommended that the SEC propose tailored rules for asset-backed issuers that are appropriately aligned with the SEC disclosure and reporting framework for ABS as well as the relevant risks to ABS investors.

On April 25, SFA submitted a letter to the Securities and Exchange Commission (SEC) in response to its proposal to amend the Investment Advisers Act of 1940. The lengthy proposal would expand regulatory requirements and impose new prohibitions on private funds, defined in a way that includes many CLOs.

The Wall Street Journal reports that the Securities and Exchange Commission’s recent climate disclosure proposal would expand the exposure of public companies to securities litigation. As a replacement to voluntary sustainability reports which can vary between different institutions and industries, companies would mandate to disclose in greater, standardized detail their climate risks and how they plan to address them. The recently proposed requirements are criticized for introducing risk of litigation related to foreseeable allegations of misstatements, even if unintentional.

On March 21, the Securities and Exchange Commission (SEC) proposed new rules that would require companies to disclose climate risk-related information in its annual financial reports and registration statements. As expected, the proposed disclosures are similar to ones based on globally used disclosure frameworks, such as the Taskforce for Climate Financial Disclosures and the Greenhouse Gas Protocol.

On March 14, the European Central Bank (ECB) published a new report reviewing the progress of European banks on disclosing climate risks. The ECB concludes that while banks are making advancements on disclosing environment related risks, the level of transparency being provided is still insufficient.

SFA’s latest Research Corner piece examines current use of existing ESG standards within RMBS, at both the corporate level as well as at the structured finance level. The report notes that SFA members Fannie Mae and Freddie Mac currently provide corporate level disclosure in line with SASB disclosures.