| U.S. financial regulators are gearing up to tackle climate change under President-elect Joe Biden. The industry will be ready to make sure any new rules suit them. When the Federal Reserve revealed this week that it will join the Network for Greening the Financial System, a group of central banks working to address the risk global warming poses to their economies, some hailed the move as progressive. But the Fed is simply catching up to peers after four years of sitting out a global surge in climate finance regulation. The NGFS already includes nearly every major economy and many regulators have moved past joining multilateral initiatives to implementing rules on their own. On Monday, U.K. companies were told that they would be forced to disclose climate-related financial risks starting 2025. New Zealand made a similar pledge in September and the European Union is more than two years into deploying a wide-ranging program of sustainable finance rules. Even Australia and Canada, which are heavily reliant on fossil fuels, are developing climate stress tests for financial institutions. U.S. policy makers will likely have to draw on the experiences of other countries when they start building a climate-risk framework, to make up for a lack of institutional knowledge. While many government agencies watched their environmental measures get rolled back during the Trump years, financial regulators never even got started because climate change was only just becoming an issue in their sphere around the time he was elected. Their most significant action so far has been a 193-page September report from a Commodities and Futures Trading Commission subcommittee that made 53 recommendations, including mandatory climate risk disclosures, standardized definitions, and stress tests. Although the subcommittee—whose members included officials from big finance firms and big oil producers—unanimously endorsed the report, it's hard to imagine they'll all be implemented swiftly and without pushback from industry lobbyists. For a preview of what's in store, consider Europe. Until last year, the development of climate-finance regulation was a mostly friendly affair between industry and regulators. In various countries, company representatives, non-governmental organizations and policy makers would gather at workshops and panels to wax lyrical about the importance of addressing financial climate risk. They all broadly agreed that climate change was relevant to finance, but the prospect of mandatory rules seemed distant: most measures were either completely voluntary or, at most, guidance. Last March marked a turning point. European bureaucrats working on a system of definitions for "green" businesses were surprised at the intensity of lobbying over what seemed like a dry, technical matter. A vote on the issue expected to easily pass the European Parliament was blocked. Analysis by InfluenceMap, a London-based nonprofit, showed that U.S. firms were among those pushing for a weaker taxonomy, although the more forceful work came from industry groups. Natural gas and nuclear groups in particular ramped up lobbying on the issue, according to Reclaim Finance, a French NGO. Hints are already emerging that climate risk stress tests, which the CFTC report recommends, will face similar resistance from banks. The exams typically determine whether lenders can withstand systemic crises such as a sudden spike in loan defaults. Regulators in several countries are developing new versions that instead examine their resilience to climate-related shocks such as a drop in fossil fuel asset prices, or a spike in natural disasters. Bank Policy Institute, a U.S. industry group, argued in a blog post last month that these new climate-based tests shouldn't be used to determine how much capital banks have to set aside—because of how the data, time horizons and effects they use vary from traditional stress tests. These arguments over how to regulate financial climate risks will be preceded by debates within the Democratic party itself over how friendly the incoming administration should be with Wall Street. The circle of U.S. financial regulation experts who have expressed strong interest in climate matters is small. Senator Elizabeth Warren, no stranger to enacting unpopular financial regulations, included climate risk disclosure in her presidential campaign platform. Sarah Bloom Raskin, a former Fed governor and Treasury official in the Obama administration, is another name that stands out. Whoever ends up in key roles, a big measure of success on climate finance will be the speed with which new practices and rules are introduced. Identifying risks alone does little to protect us; it's what comes after all the disclosures and stress tests and taxonomies that matters. With a rapidly closing window to avoid the worst effects of climate change, U.S. policy makers will have to get up to speed as soon as they can. Kate Mackenzie writes the Stranded Assets column for Bloomberg Green. She advises organizations working to limit climate change to the Paris Agreement goals. Follow her on Twitter: @kmac. This column does not necessarily reflect the opinion of Bloomberg LP and its owners. | 
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