On the eve of Trump’s presidency, the Fed withdrew from the Global Climate Network

The Federal Reserve announced on Friday that it was withdrawing from a network of global financial regulators focused on the risks of climate change, just days before President-elect Donald J. Trump’s return to power.

central bank formally joined Central Banks and Supervisors Network for Greening the Financial System in December 2020, shortly after President Biden was elected. Democrats praised the decision, arguing that regulators must ensure that financial institutions adequately manage the risk they face from extreme weather events.

And Republican lawmakers immediately criticized the Fed for joining the network, saying the central bank is Exceeding congressional mandatewhich requires inflation to remain stable and the labor market to be strong. They expressed concern that the Fed, which oversees the nation’s largest banks, could try to discourage financial institutions from lending to oil, gas and coal producers or other fossil fuel companies.

The Network of Central Banks and Supervisors for Greening the Financial System, or NGFS, was created to help central banks and other regulators share ideas and research as they learn how to account for climate-related risks in the financial sector. The network also aims to “mobilise key finance to support the transition to a sustainable economy”.

Although the Fed initially supported the network’s goals, the central bank a statement On Friday, he decided to leave after the group’s work became “increasingly widening in scope to cover a wider range of areas outside the council’s statutory mandate”.

The decision was not received unequivocally. Five of the seven governors on the Fed’s board voted to withdraw from the network, including Fed Chairman Jerome H. Powell. Adriana Kugler and Michael S. Barr abstained. Mr. Barr recently announced step down until February 28 from the position of deputy chairman for control.

This was reported by the network “sorry but respect” The Fed’s decision to leave the “coalition of the willing”.

Yann Marin, the network’s secretary general, wrote in an email that the scope of the group’s work has expanded “as our understanding of financial stability risks from climate and natural events improves.” He added that his work is conditioned only by financial risks and their consequences for financial and price stability.

The network in December 2017, during Mr. Trump’s first term as president of the United States Withdrawal from the Paris Climate Agreement.

“We are again facing political turmoil and the work of these traditional international organizations is becoming increasingly difficult,” Mr. Marin said. “The NGFS will help fulfill its mandate despite roadblocks.”

The Fed’s joining the network was a sign of the central bank’s recognition that it must begin to consider the impact of extreme weather events as they become more frequent and pose a greater risk to the financial system. The Fed had been informally involved in the network for over a year.

Republicans sharply criticized The central bank’s increased focus on climate-related risks in recent years has accused the Fed of “climate activism.” Days before the Fed officially joined the network, a group of Republican lawmakers expressed concerns about the Fed’s relationship with the group. In a December 2020 letter to Fed officials, lawmakers wrote that its recommendations “could significantly limit access to capital for critical industries and impose harmful constraints on regulated entities.”

Unlike the existing European Central Bank hugged Mr. Powell, who played a role in the transition to a low-carbon economy, has long argued that dealing with climate is the responsibility of Congress, not the Fed.

In November, the Fed refused to support the plan Developed by the Basel Committee on Banking Supervision, a global financial standard-setting body that includes the world’s biggest central banks, it would encourage lenders to disclose climate risk in their portfolios. Fed staff in 2021 wrote that “A lack of transparency around climate-related risks can increase vulnerabilities related to asset valuations, financial and non-financial leverage, and contagion risk.”

News of the Fed’s decision to leave the grid was met with alarm by experts on the link between climate change and the financial system. Lisa Sachs, director of Columbia University’s Center for Sustainable Investment, noted that membership does not compel the Fed to act outside its statutory mandate.

“The Fed’s withdrawal reflects a US trend of retreating from leadership and cooperation positions in multilateral forums, marginalizing the US and allowing other nations to take up the leadership mantle,” Ms. Sachs wrote in an email.

Former Fed Governor Sarah Bloom Raskin called the move “both significant and symbolic.”

“The Fed’s withdrawal from the climate debate among the world’s central bankers further undermines our nation’s prospects for assessing and managing climate risk without opening ideological blinders,” Ms. Raskin wrote in an email. “The symbolism of this move in early 2025 is disappointing.”