GOP lawmakers push back on Federal Reserve’s climate risk efforts

A group of 47 Republican lawmakers raised concerns to the Federal Reserve about its steps to mitigate or prepare for the financial effects of climate change. 

The letter, spearheaded by Rep. Andy Barr (R-Ky.) said the U.S. central bank should be cautious in deciding whether to implement climate change “stress tests” on banks, because of the potential effects on the oil and gas industries. 

“Introducing climate change scenarios into stress tests could accelerate the ill-advised pattern of ‘de-banking’ legally operating businesses in industries, such as coal and oil and gas,” it said. “Politicizing access to capital and choking off funding to industries that millions of Americans rely on is unacceptable, especially in times of economic and financial uncertainty.”

Stress tests are analyses aimed at ascertaining whether banks have enough capital to withstand a potential recession. 

The lawmakers also raised issues with the methodology and data that would be used in climate change scenarios during these tests. 

They additionally expressed concern about the Fed’s decision to request to join a group of government banks that collaborate on managing the financial risks from climate change. 

“We urge you not to join the [Network for Greening the Financial System ] NGFS without first making public commitments to only accept and implement in the U.S. recommendations that are in the best interest of our domestic financial system, would not disproportionately disadvantage U.S. banks compared to their European competitors and would not have harmful impacts on the customers those banks serve,” they wrote.  

Fed Vice Chairman for Supervision Randal Quarles told the Senate Banking Committee that the bank has sought membership on the NFGS.

And asked in February whether he would institute a climate stress test during a House hearing, Fed Chairman Jerome Powell said he would look at a test being done by the Bank of England. 

“We’re monitoring what the Bank of England is doing,” he said. “We haven’t made a decision to proceed with something like that.”

At the same hearing, he also said that climate change plays into the Fed’s work because of “the public’s very reasonable expectation that we would make sure that the financial sector, the banks or the utilities that we supervise, are resilient against the longer-term risks from climate change.”