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Two US Republican congressmen have called on a federal agency to probe the Federal Reserve’s membership of the Network for Greening the Financial System (NGFS), questioning the potential involvement of foreign countries in the US financial regulatory space.
House financial services committee members Patrick McHenry and Andy Barr sent a letter to the US Government Accountability Office in September, asking it to investigate membership of US financial regulators in the international network.
The Fed, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) are all members of the NGFS, a voluntary group of central banks and supervisors committed to supporting the transition to a green economy. The Fed officially joined the NGFS in 2020 after being a participant in discussion for more than a year, while the OCC joined in 2021 and the FDIC in 2022.
In the letter, McHenry and Barr question how the NGFS (whose secretariat is hosted at the Banque de France) is funded and whether it allows funding from “US adversaries” such as China, Russia or “political activists”.
“Transparency of funding of the Banque de France-sponsored NGFS is lacking, and US federal banking regulators appear not to have careful insight into the funding or concern over the lack of transparency,” the letter says.
The lawmakers say the agencies have only been minimal in their response regarding details about their involvement in the NGFS, but that they use NGFS models and data in US regulatory frameworks, such as the networks climate scenario stress tests.
“Continued research into the effects of severe weather and climate change is valuable. Prematurely inserting speculation, loose theorizing, and activist-funded data and model-creation imported from opaque global governance bodies is not,” the letter states.
During testimony in a congressional hearing, Elizabeth Jacobs, senior specialist at climate think tank E3G, said that involvement in international bodies such as the NGFS and Basel committee does not mean the US has given up its sovereignty, but instead allows America’s interests to be put forward in global financial regulatory frameworks.
“It is disconcerting to see US financial regulators out of step with international counterparts on addressing the existential challenge posed by climate change. Nations that take steps to ensure resiliency to climate related financial risks will be the stronger for it,” she said.
A conservative-led backlash against sustainability measures in the finance space has continued, prompting some agencies and companies to distance themselves from the term ESG, while some Republicans have even urged the Fed to limit its involvement in climate change initiatives.
The US Securities and Exchange Commission (SEC) recently disbanded its group of lawyers tasked with litigation on misleading ESG disclosures, Bloomberg Law reported. Meanwhile, the SEC’s climate disclosure rules have been challenged in court.
The Fed and FDIC declined to comment while an OCC spokesperson said the OCC does not comment on congressional letters. The NGFS did not respond to a request for comment.
This page was last updated October 3, 2024
Written by
Moriah Costa is the Editor-in-Chief of Green Central Banking and has over a decade of experience writing about banking and finance. She is an award-winning American journalist based in Paris and has written for major international publications, including Reuters, The Guardian, and S&P Global. Having grown up in water-stressed Arizona, she has always had a strong interest in bringing awareness to climate and environmental issues.
