In brief
The Federal Reserve has announced its withdrawal from a global network aimed at addressing climate risk in finance, a move that comes just before Donald Trump takes office again. This decision reflects a divergence in priorities as the Fed weighs its responsibilities against growing climate concerns.
The Federal Reserve has decided to leave a global group of financial regulators focused on climate change just days before President-elect Donald J. Trump is set to return to power. Formally joining the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) in December 2020, the Fed was praised by Democrats but faced skepticism from Republicans concerned about potential adverse effects on bank customers due to climate-focused regulations.The NGFS was established to help financial regulators share research about climate-related risks and support the move towards a sustainable economy. However, the Fed cited a broadening scope of the network's work as the reason for its withdrawal, suggesting that many initiatives were diverging from the Fed's core mandate. Five members of the Fed’s Board of Governors, including Chair Jerome H. Powell, voted to exit the network, while two members abstained. The decision reflects an ongoing tension surrounding the intersection of climate risk and financial regulation, particularly as extreme weather events become more frequent. Critics of the Fed joining the network had already expressed fears over how recommendations might limit access to capital for essential industries, raising alarms over the balance between environmental accountability and economic stability.
