In addition, some programs – those authorized under the Federal Reserve's so-called 13(3) authority, which requires a finding that conditions in financial markets are "unusual and exigent" – will by law have to be eliminated once credit market conditions substantially normalize.
If the transition to decarbonization is delayed,  2  "physical risks" will materialize, increasing the likelihood that natural disasters will trigger losses at financial institutions' borrowers. On the other hand, when the transition to net zero makes progress and financial institutions' existing borrowers are, for example, firms that emit a lot of carbon, the value of those borrower firms' assets will deteriorate.