The Fed asked 6 banks to simulate climate disasters. Here’s what they found.

By Avery Ellfeldt | 05/10/2024 06:20 AM EDT

Both natural disasters and the clean energy transition pose risks for the world’s largest financial institutions.

This Oct. 31, 2012 photo, taken two days after Superstorm Sandy, shows one of many homes destroyed by the storm in Mantoloking, N.J.

One of many homes Superstorm Sandy destroyed in Mantoloking, New Jersey, in 2012. Wayne Parry/AP

A major hurricane in the Northeast U.S. could trigger a wave of defaults on loans offered by Wall Street banks, according to a long-awaited analysis by the Federal Reserve that underscores climate change’s growing implications for the U.S. financial system.

That prediction is based on data from the banks themselves.

Last year, the Fed required for the first time that the six largest investment banks in the U.S. test their capacity to model — and withstand — a range of climate change impacts and futures. Among them: extreme hurricanes, fires and floods, as well as a rapid transition away from fossil fuels.


The central bank released the resultsof that exercise Thursday afternoon. The 46-page document summarizes information provided by JPMorgan Chase, Bank of America, Wells Fargo, Goldman Sachs, Morgan Stanley and Citigroup.