Democrats urge the Fed to act on climate

April 3, 2021|Written by Hilal Atici|Federal Reserve

A group of Democrats expressed concern about the Federal Reserve’s limited action to address the impacts of climate change.

Writing to Jerome Powell, Chair of the Federal Reserve, the 27 members of Congress criticised the Fed’s failure to prepare US financial institutions and the broader economy for the risks and destabilising effects of global heating.

Pointing to a recent study showing that commercial banks have provided US$3.8 trillion in fossil fuel financing since 2015, the group noted that most of that investment is coming from US banks under the Fed’s supervision.

“This flow of money exposes our financial system, our economy, and our planet to high levels of climate risk,” the representatives said. “Given the Fed’s financial stability objectives and supervisory role over these institutions, we believe there is a clear need and ability for the Fed to incentivise and enforce a reduction in fossil fuel financing.”

The letter encourages the Fed to accelerate climate action in three core areas: supervisory and prudential measures to increase the resilience of the financial system to climate risks; the incorporation of climate risk into the Fed’s monetary policy; and support for bank investment aimed at limiting global temperature rise to 1.5°C. This includes a particular emphasis on lending to low-income communities and communities of colour.

In a coordinated move, a second letter from 64 non-profit environmental and financial advocacy organisations was delivered to the Fed on the same day, with much the same message and with the same three policy proposals.

Greenpeace USA, and other organisations called on Powell to “accelerate action” and “demonstrate leadership and meaningful progress”. Both letters welcomed the Fed’s recent creation of the Supervision Climate and the Financial Stability Climate Committees.

This page was last updated May 11, 2021

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