The Fed’s membership in the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) comes after a yearlong collaboration, the Fed said. “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,” Fed Chair Jerome Powell said in a statement announcing the move.
For years, the Fed has stayed quiet as other central banks pushed to use their regulatory and research clout to mitigate the effects of global warming. But last month the Fed included climate change for the first time in its regular assessment of financial stability vulnerabilities. Powell has said that making sure the financial system is “resilient” against risks, including climate change, fits with the Fed’s congressionally assigned mandates.
Climate change is a contentious political issue in the United States. President Donald Trump led the U.S. in exiting the Paris Accord as it was detrimental to the U.S. economy due to its unfair cost and regulatory restrictions. In his official statement, the President says “the Paris Accord is very unfair, at the highest level, to the United States.” Former President Barack Obama signed the non-binding accord during his time in office and Joe Biden has said he will rejoin the climate pact.
Concerns about the involvement of the Fed in climate regulation include the future of energy independence in the U.S. Last week, 47 Republican lawmakers wrote to Powell urging him not to join the group or implement climate-change stress test scenarios for banks the energy companies depend of for operational loans.