A global group of central banks has vowed to keep working together to help the financial sector mitigate the risks of climate change and to support the transition to a greener economy even without the US Federal Reserve.
The Fed said in a statement that it had left the Network for Greening the Financial System (NGFS) because its work had “broadened in scope, covering a wider range of issues that are outside of the Board’s statutory mandate”.
However, analysts said the move was due to a turning of the political tide in Washington, with US president Donald Trump expected to oppose any green transition efforts during his second term. US banks have also left the UN-sponsored Net Zero Banking Alliance.
“This is all about politics and fear. The NGFS mission and mandate remain the same as four years ago when the Fed joined,” said Alex Martin, a senior policy analyst for Americans for Financial Reform. “What’s changed is we have an incoming administration that is dead set on protecting the fossil fuel industry at all costs, even if it means long-term financial decline for the country.”
“If the Fed wants to fulfill its mandate, it will need to resist the political whims of the president and actually live up to its claims of political independence. Policy reversals on the eve of the Trump inauguration would suggest it’s not going to be up to that task,” Martin added.
NGFS ‘regrets’ Fed decision to leave
The NGFS, set up in 2017 in Paris, said it regretted but respected the Fed’s decision, adding its remaining 143 members were still “resolved, committed and enthusiastic”.
“As extreme climate events and natural disasters are among the few visible and painful certainties of our times, our community of central banks and supervisors stands as strong and determined as ever,” the NGFS said.
Graham Steele, former assistant secretary for financial institutions at the US Department of the Treasury and a fellow at the Roosevelt Institute, said the Fed’s decision went against the scientific and economic consensus that climate change poses material financial risks.
“The depth of the Fed’s failure to lead on the issue of climate change and climate financial risk is made even more glaringly obvious as property insurance becomes increasingly unaffordable and unavailable, and wildfires and hurricanes devastate regional housing markets in communities across the US,” Steele said.
NGFS chair Sabine Mauderer, who is also vice-president of Deutsche Bundesbank, told the Handelsblatt newspaper that the network’s doors remained open: “Even members who have left are welcome.”
But central banks in the rest of the world won’t stand still on the climate even without the Fed, experts predict.
The NGFS said it will produce work on short-term climate risk scenarios in 2025 and it has been asked by the G20 presidency to research how to better account for adaptation in transition planning.
“There is a real danger of global regulation fracturing in a number of areas, but we are not going to see the world turning its back on ESG issues,” said British central banking expert Mike Peacock on his blog. “Europe and most of the Asian economic powerhouses are not going to follow Trump’s lead.”
Stuart Mackintosh, executive director of the Group of Thirty thinktank, agrees.
“Instead of defending America’s economic dominance, political score-setting may unravel the green progress in US markets, among firms and with consumers,” he wrote. “Other governments need to sustain momentum despite Trumpian denialism. There is no alternative.”
British economist Ann Pettifor predicted that China will keep taking the lead in the shift to renewables by promoting its electric vehicle and solar industries.
“My hope lies with China because China can’t afford Trumpian kind of populism. They already recognise that they’ve got a problem with Mongolia and drought and dust, and the impact on big cities,” she said. “We’ll see China take a more prominent role and it will actually push people like Trump into doing things differently.”
This page was last updated January 27, 2025
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Emma Thomasson is a British journalist, consultant and trainer based in Berlin. She is an expert in economics, politics, business and technology. She previously worked for Reuters as a correspondent and bureau chief in Germany, Switzerland, the Netherlands, South Africa and the UK.
