On October 16, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC) and the Federal Reserve (Fed) jointly announced the rescission of guidance intended to mitigate climate-related financial risks at large financial institutions. The October 2023 interagency guidance, “Principles for Climate-Related Financial Risk Management for Large Financial Institutions,” had required financial institutions[1] with more than $100 billion in total assets to consider climate risks in their long-term planning.
The move represents the latest effort by the Trump administration to roll back the integration of climate-related considerations into federal policy.
Overview of the guidance
On October 30, 2023, the FDIC, OCC and Fed published final interagency guidance for addressing climate-related financial risks. Noting that the “financial impacts that result from the economic effects of climate change … pose[d] an emerging risk to the safety and soundness of financial institutions,” the agencies proposed an overarching framework to manage exposures to climate-related financial risks. Such risks include both physical risks (e.g., risks from natural disasters, higher average temperatures and changes in precipitation) and transition risks (e.g., stresses to institutions arising from shifts in policy, consumer and business sentiment) associated with climate change. This guidance coincided with other Biden administration efforts to promote corporate climate-related disclosures, such as the Securities and Exchange Commission’s 2023 adoption of (now defunct) climate disclosure rules and federal contractor climate reporting rules proposed in 2022 but never advanced.
The framework contained six principles to manage climate-related financial risks: governance; policies, procedures and limits; strategic planning; risk management; data, risk measurement and reporting; and scenario analysis. The guidance also provided a set of risk assessment principles to assist institutions in addressing climate-related financial risks in various risk categories – including risks related to credit, liquidity, operations, interest rates, and legal and compliance.
While the guidance was lauded by environmental, social and governance (ESG) advocates, certain industry groups and financial regulators criticized the agencies for overstepping and introducing unnecessary guidelines that may impose additional compliance burdens on institutions. Federal Reserve Governor Chris Waller voiced his disagreement, stating he did not believe “the risks posed by climate change are sufficiently unique or material to merit special treatment relative to other risks.”
Withdrawal of guidance
Two years later, the three agencies reversed course. In withdrawing the guidance, the agencies noted that the principles were “redundant,” as their existing safety and soundness requirements already obligate institutions to have in place risk management processes. Further, the agencies noted that financial institutions are already expected to consider and address all material risks and be “resilient to a range of risks, including emerging risks.” The agencies also expressed concern that the principles for the management of climate-related financial risk could “distract” from management of other potential risks addressed by their existing risk management processes and agency rules and guidance.
Note that the OCC had previously withdrawn its participation in the principles in March 2025, but joined the FDIC and Fed in formally withdrawing the guidance.
What this means
The withdrawal of the guidance marks the latest step by the Trump administration to curtail the role of climate-related considerations in federal and state policy. The move is part of a broader rollback of climate- and ESG-related regulations and guidance across the executive branch, including executive orders rescinding the prior administration’s climate change initiatives, legal challenges to state-level climate laws, and the termination of the SEC’s defense of its climate disclosure rules. Additional measures have included the removal of climate-related content from federal websites, the dismissal of key Environmental Protection Agency personnel preceding the recent government shutdown, and directives from the Department of Energy restricting the use of terms such as “climate change” and “sustainability” in federal communications.
In response to the administration’s policy shift, many financial institutions have walked back their prior voluntary climate commitments, such as withdrawing from the Net-Zero Banking Alliance. Earlier this month, the alliance, a United Nations-backed coalition of banks and industry stakeholders with the mission of cutting carbon emissions, voted to cease operations due to mass departures of financial institutions not only in the United States but across the globe.
Financial institutions should note, however, that while the climate‑risk principles are no longer in effect, the fundamental expectation remains unchanged: Institutions are responsible for identifying and managing all material risks in their operating environment. Accordingly, institutions should continue to evaluate whether and how climate-related risks may impact their safety and soundness standards.
[1] “Financial institution” includes national banks, federal savings associations, US branches and agencies of foreign banks, state nonmember banks, state savings associations, state member banks, bank holding companies, savings and loan holding companies, intermediate holding companies, foreign banking organizations with respect to their US operations, and nonbank systemically important financial institutions (SIFIs) supervised by the Board of Governors of the Federal Reserve.