CFTC Announces New Climate Risk Unit — the “CRU”

On March 17, 2021, Acting CFTC Chairman Rostin Behnam announced that the derivatives regulator had established a new interdivisional group called the Climate Risk Unit or the “CRU” to focus on the derivatives markets’ role in addressing climate-related risk and transitioning to a low-carbon/net-zero economy.  The CRU (sounds like an exclusive cool-kids club) will include staff from across the agency and “represents the agency’s next step in response to what has become a global call to action on tackling climate change.”  The CFTC’s announcement is the latest from U.S. federal regulators, including the SEC and DOL, that seem single-mindedly focused on climate and ESG considerations that may (or may not) affect their registrants and respective areas of jurisdiction.

According to the press release, the CRU demonstrates the CFTC’s “commitment to taking thoughtful and deliberate next steps toward building a climate-resilient financial system.”  Reference is made to Behnam’s “years of climate leadership at the CFTC,” including spearheading the effort to establish the Market Risk Advisory Committee’s Climate-Related Market Risk Subcommittee and requesting the September 2020 report on Managing Climate Risk in the U.S. Financial System.

The CRU will focus on research and ongoing market and stakeholder outreach related to climate and ESG issues.  This will include proactive engagement with exchanges, clearinghouses, industry groups, and market participants.  The CRU will also push for increased “participation in domestic and international fora aimed at building consensus for consistent standards, taxonomies, disclosures, and practices across derivatives products and markets, as well as related clarity on regulatory, capital, and accounting standards.”  The CRU will also consider and evaluate “whether tools such as climate finance labs or regulatory sandboxes would enhance development of climate-related market risk tools, products, and services.”

This certainly will not be the last from the CFTC on this front.  If the agency’s cross-town counterpart, the SEC, serves as an example, we will likely see a flurry of climate and ESG announcements and policy statements from the CFTC over the coming weeks and months as it transitions to new leadership under the Biden Administration.