- Federal Reserve formally becomes a member of the Network of Central Banks and Supervisors for Greening the Financial System
- Coalition aims to enhance the global response to meeting the goals of the Paris climate agreement, and to strengthen the role of the financial sector in addressing climate change
- The Fed has been participating informally in the coalition for a year, but has been cautious in its approach to climate issues due to the partisan nature of the issue in the United States
The Federal Reserve Board has joined a global coalition of central banks and supervisory committees dedicated to strengthening the financial sectors role in addressing climate change and mitigating the risks associated with its effects.
In a brief statement, the Fed announced Tuesday that it has formally joined the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). The Fed said this group supports research, the exchange of ideas, and best practices on environmental issues and climate change risk management as it affects the financial sector.
The Fed had been informally participating in the group’s discussions starting for a year. NGFS announced that seven other banking entities also joined alongside the Fed.
NGFS originated in December 2017 with eight central banks and supervisory committees, but its membership has expanded significantly since then. Its stated purpose is to strengthen the global response necessary to meet the goals of the Paris climate agreement, and to “enhance the role of the financial system to manage risks and to mobilize capital for green and low-carbon investments in the broader context of environmentally sustainable development.”
The Fed has gradually been incorporating climate change matters into its work, such as including an in-depth summary of the financial risks posed by climate change in this year’s financial stability report for the first time. Other financial institutions that have joined NGFS have taken steps such as climate stress tests, which assess how well banks’ balance sheets can endure severe weather events.
The Fed has generally proceeded more cautiously on climate change, since the issue has taken on a more pronounced partisan divide over the years. While Democrats have long championed formal Fed membership in the NGFS, Republicans have often rejected or questioned climate science. Members of the GOP have also expressed concerns that the Fed might adopt policies that would put the United States at a disadvantage, or inhibit credit access for borrowers such as fossil fuel companies.
