CFTC comment request gauging future action on climate-related risks

The CFTC announced the request for information (RFI) on Thursday following the agency’s first-ever Voluntary Carbon Markets Convening. At the meeting, Chairman Rostin Behnam said the comment period would “seek feedback on all aspects of climate-related financial risk as it may pertain to the derivatives markets, underlying commodities markets, registered entities, registrants, and other market participants.”

Comments will be accepted for 60 days following the RFI’s publication in the Federal Register.

The CFTC’s goal in seeking feedback is to “better inform its understanding and oversight of climate-related financial risk as pertinent to the derivatives markets and underlying commodities markets,” according to an agency press release.

“The RFI will seek responses on questions specific to data, scenario analysis and stress testing, risk management, disclosure, product innovation, voluntary carbon markets, digital assets, greenwashing, financially vulnerable communities, and public-private partnerships and engagement,” said Behnam in the release. “My intention is to focus on ensuring that America’s farmers, ranchers, manufacturers, commercial end-users, and investors are equipped to manage their risks from increasingly severe and frequent weather events as well as the transition to a net-zero, low-carbon economy.”

The CFTC’s four other commissioners each voted to release the RFI for the sake of receiving public input, though its Republican membership expressed concern regarding the feedback sought and how it might impact the agency’s decision-making.

“I caution that for any potential future commission action, we must take care to consider the impact on small entities and evaluate alternatives that would accomplish the objectives of any potential rule without unduly burdening the substantial numbers of growers, producers, and other end-users who depend on our markets for risk management and price discovery,” said Commissioner Caroline Pham in a statement.

“I am concerned that requesting information on matters over which the CFTC has no statutory authority and ignoring opportunities to ask questions of market participants already using our markets to hedge their climate exposure will not further the purported goal of this RFI,” stated Commissioner Summer Mersinger, who also noted her surprise the RFI does not include questions focused on the agricultural sector.

Though the actions it has taken have not received as much attention as those of the Securities and Exchange Commission, the CFTC has equally been examining its role in addressing risks related to climate change. The CFTC in March 2021 formed a “Climate Risk Unit” to identify areas where refinements could be made to its approaches.