WASHINGTON — Congressional Republicans criticized an effort in the U.S. and abroad to include banks in an international push to reduce greenhouse gas emissions, saying the plan could cut off banking access for energy and fossil fuel companies.
“Pressure on banks by public officials to cut off financing to fossil energy, or otherwise limit their ability to extend credit to American energy producers or traditional utilities, is political rhetoric masquerading as risk management,” according to a letter sent Wednesday by 44 House Republicans to former Secretary of State John Kerry, the Biden administration’s climate envoy.
A separate letter sent Tuesday by Senate Republicans, led by Banking Committee ranking member Pat Toomey of Pennsylvania, also argued the executive branch lacks the authority to dictate which businesses can receive bank loans.
“Only Congress through the enactment of laws can decide what activity is permissible or prohibited, thereby protecting one’s property from a whimsical and capricious administrative state,” said the letter, which was signed by all 12 Republicans on the Banking Committee.
The GOP letters coincide with global leaders including Kerry and Mark Carney, a climate envoy for the United Nations, announcing a new global banking alliance of 43 leading financial institutions to focus on transitioning to a net-zero emissions economy. The alliance was unveiled just ahead of climate talks hosted by President Biden with other world leaders this week.
The letters chastised the apparent efforts by Kerry, first reported last month by Politico, to urge banks behind the scenes to join the new alliance and make specific pledges to hit climate finance benchmarks by 2030. That would align with the Biden administration’s expected vow this week to cut U.S. greenhouse gas emissions in at least half by 2030.
Several U.S. banks have already made decisions on their own to curtail fossil fuel financing, the Republicans say.
“Politicizing access to capital and choking off funding to industries that millions of Americans rely on is unacceptable, especially in times of economic and financial uncertainty,” said the House Republicans. The House GOP letter was led by Rep. Andy Barr of Kentucky, a member of the House Financial Services Committee.
Kerry said earlier this month at an event hosted by the International Monetary Fund that the Biden administration was also preparing to issue an executive order on climate risk disclosure that could require companies to disclose to their shareholders how their business could be affected by climate change.
“It’s going to change allocation of capital,” Kerry said. “Suddenly people are going to be making evaluations considering long-term risk to the investment based on the climate crisis.”
Those comments were also troubling to Republicans, who argued in their letters to Kerry that businesses are already required to disclose material risks to investors.
“Your effort would compel firms to make disclosures beyond those mandated by the materiality threshold; suggesting such disclosures are not intended to truly assess risk, but are instead designed to name-and-shame financial institutions,” said the House Republicans.
Senators also blasted Kerry’s efforts as politically motivated.
“Your comments suggest the White House and [Securities and Exchange Commission] may misuse the current disclosure framework to advance a liberal political agenda on global warming, rather than provide the public with material information,” the Senate letter said.
The GOP backlash resembles a similar outcry from members of Congress in response to a controversial Obama-era Justice Department policy known as Operation Choke Point.
That effort investigated banks that did business with firms that were disfavored by the administration but were legal, including firearms sellers, pawn shops and payday lenders. The Trump administration
Both letters to Kerry come as Biden prepares to hold a major international climate summit this week with 40 world leaders whose countries are responsible for about 80% of global emissions.
Also this week, the Treasury Department announced it is creating a “climate hub” that will focus on identifying climate-related financial risks, creating climate-centered economic and tax policies, and facilitating investments to transition to a “net-zero” economy.
Treasury also appointed John Morton, a former Obama administration official and private equity investor, to lead the hub as climate counselor. He will report to Treasury Secretary Janet Yellen and advise her “on a broad range of climate matters,” the department said in a press release.
“Climate change requires economy-wide investments by industry and government as well as actions to measure and mitigate climate-related risks to households, businesses and our financial sector,” Yellen said in a statement. “Finance and financial incentives will play a crucial role in addressing the climate crisis at home and abroad and in providing capital for opportunities to transform the economy.”
