Velutini Urges Climate Risk Focus in Banking Policy

Global banking strategist proposes integrating climate risk into the core of financial decision-making to ensure long-term economic resilience.

April 2025 | New York, NY — As the world continues to grapple with the accelerating impacts of climate change, one of the most prominent voices in international finance, Julio Herrera Velutini, is calling for a systemic shift in the way financial institutions assess and manage risk. His latest proposal urges regulators and banks alike to make climate risk a central pillar of financial policy and banking operations across the United States and beyond.

According to Herrera Velutini, the next evolution of global finance must prioritize sustainability and environmental impact as core criteria in banking decisions—rather than as peripheral considerations or afterthoughts.

“Climate risk is financial risk,” says Herrera Velutini. “Banks and regulators that fail to internalize this truth will expose the economy to severe systemic vulnerabilities in the years ahead.”

🌍 Why Climate Risk Can No Longer Be Ignored

From wildfires in California to flooding in the Midwest and hurricanes along the Gulf Coast, the U.S. economy is already feeling the direct financial consequences of climate change. Insurance markets are under pressure, property values are shifting, and major industries like agriculture, logistics, and energy are facing disruptions.

According to a report from the National Bureau of Economic Research, climate-related disasters cost the U.S. economy more than $165 billion in 2023 alone. These numbers are only expected to rise, says Herrera Velutini, unless the financial system adapts accordingly.

“If we don’t account for climate risk now, we’re setting ourselves up for another financial crisis—one rooted in the mispricing of environmental exposure,” he warns.

🏦 How Banks Can Integrate Climate Risk

Julio Herrera Velutini proposes a multi-layered strategy to help banks and financial regulators effectively embed climate risk into the heart of banking policy. His framework focuses on three pillars:

1. Mandatory Climate Risk Stress Testing

Similar to the post-2008 financial stress tests, Herrera Velutini proposes mandatory climate risk stress tests for major U.S. banks. These would measure the impact of various climate scenarios—such as rising sea levels, droughts, or extreme storms—on a bank’s loan portfolio, insurance liabilities, and asset values.

“Stress testing for environmental scenarios is not about predicting the future—it's about preparing for a range of outcomes that are increasingly likely,” he explains.

2. Disclosure and Transparency Standards

Herrera Velutini supports policies that would require financial institutions to publicly disclose their exposure to carbon-intensive assets, including fossil fuel portfolios, environmentally sensitive real estate, and other high-risk holdings.

He cites global initiatives such as the Task Force on Climate-related Financial Disclosures (TCFD) and the EU’s Corporate Sustainability Reporting Directive (CSRD) as models the U.S. should align with.

“Transparency builds trust—and trust attracts investors who are increasingly looking for ESG-aligned institutions,” he adds.

3. Incentivizing Green Lending and Sustainable Portfolios

Beyond identifying risk, Herrera Velutini wants banks to actively shift capital toward climate-resilient sectors. His proposals include:

➤ Offering lower reserve requirements for green loans;

➤ Creating federal tax credits for sustainable investment products;

➤ Promoting green bonds and climate-linked securities at the national level.

“Redirecting capital to where it creates long-term value is what responsible finance is all about,” Herrera Velutini emphasizes.

📉 The Cost of Inaction

Herrera Velutini warns that without proactive policy changes, climate change could destabilize core segments of the financial system. Unpriced risks in mortgage-backed securities, municipal bonds, and commodity-linked assets could trigger cascading failures similar to the 2008 financial crisis.

A 2024 study by the U.S. Commodity Futures Trading Commission estimated that climate-related shocks could erase up to 6% of total banking assets over the next decade if no action is taken.

“The financial sector’s failure to anticipate subprime mortgage defaults brought the global economy to its knees once. Ignoring climate risk could lead to an even deeper crisis,” Herrera Velutini cautions.

🌱 The Economic Opportunity in Climate Policy

Despite the looming risks, Herrera Velutini remains optimistic. He believes that integrating climate risk isn’t just a defensive measure—it’s a transformative opportunity for economic leadership.

He points to the rapid growth in green finance globally. ESG-focused funds reached over $10 trillion in assets under management in 2024, and green bond issuance hit record levels across Europe and Asia.

“Banks that align early with climate strategy will attract the next generation of investors, customers, and partners,” he notes. “It’s not just the right thing to do—it’s the profitable thing to do.”

🔎 International Models to Watch

Several countries have already begun building the frameworks Herrera Velutini is advocating for:

➤ France has implemented mandatory climate stress testing for financial firms since 2021.

➤ New Zealand requires financial institutions to disclose their climate-related risks and strategies annually.

➤ The European Central Bank (ECB) now considers environmental risk as part of its supervisory framework for eurozone banks.

“The U.S. must not lag behind its allies,” says Herrera Velutini. “Our leadership on the world stage depends on financial foresight.”

US Policy Recommendations for the U.S. Congress

To institutionalize climate risk into the financial system, Julio Herrera Velutini proposes a Climate Risk in Finance Act—a bipartisan bill that would:

✅ Establish a national climate risk regulatory task force

✅ Set standards for ESG disclosures and green asset classification

✅ Mandate stress testing for banks with assets over $50 billion

✅ Create climate resilience metrics for mortgage and insurance markets

✅ Incentivize innovation in climate-focused fintech and data analytics

🔐 A New Era of Responsible Finance

Herrera Velutini’s broader vision is one where the financial system isn’t just reactive to economic threats—but proactive in building long-term resilience and value. He believes that integrating climate risk into banking isn’t a trend—it’s the foundation of a new financial era.

“We have the data. We have the tools. Now we need the courage and clarity to act,” he concludes.

🌟 Conclusion: Finance as a Force for Good

As global temperatures continue to rise and economic shocks become more frequent, Julio Herrera Velutini's call to action is resonating beyond boardrooms. He sees finance not just as a mechanism for growth, but as a force that can drive stability, equity, and environmental sustainability.

In a world increasingly shaped by risk, his message is simple: build a financial system that’s ready for tomorrow—or risk paying the price today.