Randal K. Quarles, the Fed’s vice chair for bank supervision and regulation, was asked about the critique while testifying before House lawmakers on Wednesday. Mr. Quarles defended the Fed’s attention to climate change as part of regulation, calling it a “potential risk” that finance companies and the governments that oversee them need to consider.
“As a regulator, we should look at that risk,” he said, and “develop an analytical framework so that we don’t respond to political pressures, so that we don’t respond to headlines, but develop a careful, data-driven framework.”
The sweep of the new order reflects the many ways that climate change can endanger the economy. There are indications that it’s already happening.
In Florida, the demand for homes in high-risk coastal areas is beginning to lag the rest of the state, with prices following suit. Nationwide, banks are moving more of those coastal mortgages off their books, by selling them to federally backed mortgage lenders Fannie Mae and Freddie Mac — a sign that those banks are aware of the growing risk of default and are shifting that risk to taxpayers.
The insurance market is also feeling the impact of more severe disasters. In California, insurers are refusing to cover homes in fire-prone areas, prompting state and local officials to scramble for solutions. Other states across the West are seeing signs of similar trends.
In response to those threats, the new order directs federal agencies that oversee mortgage loans to find ways to account for the impact of climate change on those loans. It also tells the Federal Insurance Office, a division of the Treasury Department, to assess the climate-related threats facing insurers.
The order also reinstates a rule imposing higher standards on federally funded construction of roads, buildings and other projects in flood zones — a rule that was created by President Barack Obama and then revoked by President Donald J. Trump.
“Americans should be able to know the real risks that extreme weather and rising seas pose to the homes that they’ve invested in,” said Gina McCarthy, Mr. Biden’s senior adviser on climate change. “Knowing the risks is the first step to actually addressing them.”
Jeanna Smialek and Alan Rappeport contributed reporting.
