US supreme court ruling prompts fears over SEC climate disclosures

US Supreme Court ruling prompts fears over SEC climate disclosures, Sweden’s Riksbank calls for ban on cryptocurrency “proof of work” method, and more from this week in green central banking

Supreme court ruling casts doubt over US disclosures

A decision by the US supreme court to curb federal agency powers in regulating greenhouse gas emissions has cast doubt on plans by the Securities and Exchange Commission (SEC) to require companies to disclose their climate risks.

The controversial ruling imposes limits on the ability of the Environmental Protection Agency to issue regulations to reduce emissions from power plants in the absence of explicit congressional approval. Experts have warned that other regulatory initiatives could be subject to renewed legal challenges as a result.

“The basis for the decision is essentially applicable across all the regulatory agencies and we’d expect many actions by the SEC and other financial federal regulators to quickly become bullseyes for corporate America,” Dennis Kelleher, chief executive of Better Markets, told Reuters. The SEC climate rule was an obvious target for such legal challenges, he added.

The SEC published its draft rule on climate disclosures in March, and is expected to finalise the new requirements by the end of 2022.

Bank of England makes little progress on decarbonising corporate bond purchases

The Bank of England (BoE) has published its third annual climate-related financial disclosure, revealing that its corporate bond purchase scheme (CPBS) is still aligned with a temperature rise of 2.4ºC.

This contrasts with an implied temperature rise of 3.0ºC a year ago, although the report notes that the difference between the two numbers is almost entirely due to a change in the methodology used to calculate it. Lukasz Krebel, an economist at the New Economics Foundation, highlighted that the figure is based on an assumption that companies will meet their emissions targets, which could turn out to be misguided.

Krebel also questioned the BoE’s decision to devote much of its report to studying the climate impact of the CBPS, rather than more potentially impactful areas of the BoE’s activities, such as its collateral framework, capital requirements and refinancing operations.

“The bank must discourage harmful investments in fossil fuels by greening its collateral framework and imposing higher capital requirements on investments in new fossil fuels,” he said.

Scorecard finds US regulators making progress on climate risk

US financial regulators have made significant progress towards addressing climate risks over the past year, according to the second iteration of Ceres’ Climate Risk Scorecard. All regulators have now affirmed climate change as a systemic risk and most have appointed senior staff to lead their work to address it, the report finds.

However, with the exception of the Securities and Exchange Commission’s proposed climate disclosure rule, most agencies have taken limited steps to bolster climate reporting standards. Other key US institutions – the Federal Reserve, Office for the Comptroller of the Currency, Federal Deposit Insurance Corporation and National Credit Union Association – have taken no affirmative steps to incorporate such reporting into their regulations or guidance.

Ceres published its first scorecard in April 2021 as part of its report Turning Up the Heat. Progress in the past 12 months has been assisted by the publication of the Financial Stability Oversight Council report on climate risks, which has now been endorsed by all top regulators.

Riksbank calls for ban on crypto ‘proof of work’

Sweden’s Riksbank has backed calls for a ban on the proof of work method used to confirm transactions and generate new cryptocurrencies, based on the environmental impact of the process.

The recommendation features in a study, Cryptocurrencies and Their Impact on Financial Stability, which forms part of the central bank’s latest financial stability report. The paper notes the sharply-rising energy consumption of currencies such as bitcoin, which according to the Centre for Alternative Finance at Cambridge University, is roughly equivalent to that of Norway.

“Recently, some extraction of crypto assets has been established in northern Sweden, where it consumes as much electricity as 200,000 households do on an annual basis,” said the bank.

Sweden’s environment agency and financial supervisory authority have already said that the proof of work method should be banned in favour of other, less energy-intensive methods, and the Riksbank says it agrees with these proposals.