Central Banks

Federal Reserve Federal Reserve

The Fed has been criticised for its relatively slow progress on addressing climate risk, but is gradually moving into line with the mainstream of G20 central banks.

Chair Jerome Powell joined with other top regulators on the Financial Stability Oversight Council (FSOC) to issue a landmark report acknowledging that climate change represents a systemic risk to US financial stability. He has since confirmed that the Fed will issue climate risk guidance and integrate climate considerations into monetary policy.

However, climate advocates are frustrated with the Fed’s failure to give firm timelines for its plans. And although Powell has talked up the value of climate stress tests – a key element in other central banks’ toolkits – the Fed has given no indication as to when these will be introduced.

Climate action by the Fed is being hindered by a hostile political environment. Republican lawmakers have sought to portray even limited measures as representing a breach of the Fed’s mandate, and some pro-climate nominees have been blocked on this basis.

Climate action

  • The Fed acknowledged climate risk in its financial stability report to Congress and in numerous speeches by governors.

  • Jerome Powell has committed to issue supervisory guidance on climate risk – while draft guidance has already been published by the Office for the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC).

  • The Fed established a new Supervision Climate Committee and announced a Financial Stability Climate Committee to advise the Board of Governors on how to address climate risk.

  • The Fed encouraged investment in renewable energy and climate resilience activities as part of the Community Reinvestment Act.

Climate inaction

  • Neither the Fed nor other regulators have yet confirmed when they will carry out climate risk exams, or climate stress tests.

  • Although the OCC and FDIC have published draft guidance on climate risk, this is not currently set to apply to all banks.

  • No senior Fed official has acknowledged the financial risks posed by nature los.

Jerome Powell

Chair of the Board of Governors of the Federal Reserve

Term of appointment

2022-2026

Link to biography

How the Federal Reserve stacks up

Rank Country Aggregate Score (out of 130) Grade (A+ to F) Research and Advocacy (out of 10) Monetary Policy (out of 50) Financial Policy (out of 50) Leading by Example (out of 20)
16 United StatesUnited States 16 D- 10 0 6 0

Central Bank/Supervisor

Federal Reserve

More info

Research & Advocacy

10 out of 10

High-impact

  • N/A

Medium-impact

Low-impact

Monetary Policy

0 out of 50

High-impact

  • N/A

Medium-impact

  • N/A

Low-impact

  • N/A

Financial Policy

6 out of 50

High-impact

  • N/A

Medium-impact

Low-impact

Leading by Example

0 out of 20

High-impact

  • N/A

Medium-impact

  • N/A

Low-impact

  • N/A

What steps are missing in the Federal Reserve toolbox to address climate risk?

Civil society expects the bank to do the following:

  • Establish long-term climate stress tests and add near-term climate variables to existing stress tests.

  • Integrate additional transition risks and physical risks into capital risk weights.

  • Follow climate risks into the shadow banking sector.

Latest News

News| September 25, 2023

Democrats urge Fed to address climate financial risks

Letter to the Federal Reserve calls out actions that “fall short” of mitigating climate-related risks and financial stability.
News| August 29, 2023

Climate change receives little attention at Jackson Hole Fed summit

Other than a mention by ECB president Christine Lagarde, climate change was not on the agenda at this year’s Jackson Hole summit. …
News| August 22, 2023

US financial regulators have yet to implement climate risk rules, report finds

A report from Ceres found that while some progress has been made, all of the 10 US regulators analysed have yet to implement climate-risk rules.
News| August 8, 2023

FSOC highlights progress on climate report recommendations

The FSOC’s progress report on climate change highlights the efforts US agencies have made and recommends more coordination on data and risk analysis. …
Opinion
News| June 8, 2023

American exceptionalism on climate risk amplifies financial instability

The Federal Reserve stands apart from its peers in downplaying climate risk, even as some parts of the US become uninsurable, says Alex Martin of Americans for Financial Reform.
News| May 23, 2023

Republican senators demand Fed curbs ‘climate activism’

Republican senators condemn the Federal Reserve’s climate stress tests as politically motivated, demanding that chairman Jerome Powell “reign in the Fed’s regional banks”.
Opinion
News| May 18, 2023

Fed urges caution in wake of Silicon Valley collapse, so what about climate?

In the wake of the Silicon Valley Bank collapse, the Fed has said a precautionary approach towards risk is needed. Will this be applied to climate-related risk, ask Anne Perrault and David Arkush of Public Citizen.
News| May 17, 2023

Climate change is not a “serious risk” to financial stability, says Fed board member

Christopher Waller said he believes that the “risks posed by climate change are not sufficiently unique or material to merit special treatment”.
News| April 3, 2023

US representatives reintroduce legislation to limit fossil fuel financing

Politicians hope the bill will require the Federal Reserve to bring in policies restricting finance for fossil fuel and deforestation activities.
Opinion
News| March 17, 2023

Silicon Valley Bank crisis shows climate risk can push banks over the brink

The collapse of the tech start-up bank has exposed cracks in the system which will only widen as the climate crisis unfolds, says Yevgeny Shrago of Public Citizen.

Latest Research

What are Large Global Banks Doing About Climate Change?

January, 2023

This research report analyses the efforts of major global banks to address their climate-related risks and address climate change.

Written by Federal Reserve

Tackling Fossilflation

December, 2022

A Toolkit for Price Stability and a Just Transition

This report by Positive Money US analyses the role of “fossilflation” in causing inflation and provides policy recommendations to replace the existing framework that solely relies on the Federal Reserve.

Written by Positive Money US

The Impact of Climate Change on Price Stability

December, 2022

Informed by central bankers, this literature review of climate change and inflation studies finds that climatic effects on prices already exist and that climate issues should be incorporated into monetary policy.

Written by E-axes Forum