Activists call Fed’s climate risk assessment pilot program for banks a ‘welcome first step’

Members of the Stop the Money Pipeline coalition on Thursday welcomed a pilot program by the US Federal Reserve to study banks’ exposure to climate risks while warning that stronger action by the Fed and the national banking system is needed. to curb Wall Street’s fossil fuel financing.

“Big banks are still pouring billions into fossil fuels, ignoring the serious risks posed by climate change and threatening the savings of ordinary Americans in the process.”

According to the Fed, the “climate scenario analysis pilot exercise”, which will begin early next year, is “designed to strengthen the ability of supervisors and companies to measure and manage climate-related financial risks. “against a worsening planetary emergency fueled, in part, by the policies and activities of central and commercial banks.

Six of the largest US banks – Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo – will participate in the program, which “is exploratory in nature and has no capital implications”.

Akiksha Chatterji, campaign manager at the advocacy group Positive Money US, said in a statement that “the new climate scenario exercise is a welcome first step and indicates that the Fed is finally starting to take climate risks seriously, after falling behind its international counterparts”.

“The analysis of climate scenarios is a useful exercise in assessing some of the serious risks that climate change poses to financial institutions, but we need the Fed to move from exploration to action,” Chatterji added. “We have enough information about the dangers of climate change to warrant regulatory and supervisory action now, such as penalizing excessive and reckless lending by banks to fossil fuels. To truly preserve financial stability, the Fed must further introducing policies that reflect the high risk of fuel investments.”

The pilot program comes as the world’s 100 largest banks are set to set new records for profits in commodity trading this year amid soaring food and energy prices – even then as millions face starvation – and as financial institutions continue to pour billions of dollars into fossil fuel investments, despite deceptive promises of net zero.

Earlier this month, the Stop the Money Pipeline coalition – which includes more than 200 advocacy groups – launched a new “Blame Wall Street” campaign aimed at detaining the banks that have invested more than $1 trillion in oil and gas projects in recent years.

In response to the new Fed program, Adele Shraiman, representative of the Sierra Club’s Fossil-Free Finance campaign, said that “the climate crisis is already affecting financial institutions and the broader economy, but banks are not seriously unprepared to react and adapt”.

“In fact, the big banks are still pouring billions into fossil fuels, ignoring the serious risks posed by climate change and threatening the savings of ordinary Americans in the process,” she continued.

“As the nation’s most powerful financial regulator, the Federal Reserve is finally sending a strong signal to banks to start taking climate risk seriously and prepare for the clean energy transition,” Shraiman added. “This is a promising first step in the urgent effort to rein in dangerous and reckless behavior on Wall Street and protect our financial system from a climate-related economic crash.”

Emily Park, lead campaign organizer for climate action group’s Fossil-Free Fed, said her group was “pleased to hear about the climate scenario risk analysis pilot exercise with the Fed. and six of America’s largest banks”.

“While we applaud this first step, it’s not enough,” Park said. “Hurricane Ian shows us that the American economy and the American people can no longer wait for stronger action from the Fed and the American banking system. We need the Federal Reserve to do more. Now.”

Ryan H. Bowman