Fed joins global network to fight climate change through financial system

The Federal Reserve Board announced Tuesday that it has joined an international network of central banks and regulators devoted to fighting climate change through the global financial system.

The Fed is now a member of the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), the bank announced Tuesday. The Fed board approved the decision to join the NGFS by a 6-0 vote on Dec. 7. 

“As we develop our understanding of how best to assess the impact of climate change on the financial system, we look forward to continuing and deepening our discussions with our NGFS colleagues from around the world,” said Fed Chairman Jerome Powell, a Republican first appointed to the Fed by former President Obama and elevated to chairman by President Trump.

The Fed’s formal admission to the NGFS was widely anticipated after Powell and other Fed officials said the bank was seeking to join the group. Fed officials began participating in NGFS conferences and activities more than a year ago but had not formally joined the network.

Financial sector critics and environmentalists have long called on banks and regulators to take a more aggressive role in fighting climate change and forcing the financial sector to reckon with the risks it can pose to their operations. 

U.S. banks, financial policymakers and regulators had largely waved off those calls until 2020, which some critics say is an attempt to get ahead of stringent potential regulations from the incoming Biden administration. Republicans and some Trump-appointed regulators have been fiercely opposed to those efforts and have warned the Fed and banks not to blacklist companies involved in the oil and gas industry.

A group of 47 Republican lawmakers urged the Fed in a letter last week not to test banks on their ability to withstand climate-related risks and not adopt NGFS recommendations that could be harmful to U.S. oil and gas producers.

The Office of the Comptroller of the Currency also proposed a rule that would effectively ban banks from turning away customers based on their industry alone, a response to pledges from several major banks to stop financing oil and gas drilling and firearms manufacturers.