The Federal Reserve Board said Tuesday that it has officially joined a global coalition of central bankers and financial regulators focused on managing climate risk to the financial sector.
The Fed has been participating in discussions with the Network of Central Banks and Supervisors for Greening the Financial System for over a year now, the regulator said in a press release. The NGFS convenes banking regulators from around the world to exchange ideas, research and best practices for understanding the systemic financial risks posed by a warming world and increasingly severe weather events.
“As we develop our understanding of how best to assess the impact of climate change on the financial system, we look forward to continuing and deepening our discussions with our NGFS colleagues from around the world," Fed Chair Jerome Powell said.
Bloomberg
“As we develop our understanding of how best to assess the impact of climate change on the financial system, we look forward to continuing and deepening our discussions with our NGFS colleagues from around the world," Federal Reserve Board Chair Jerome Powell said in a press release.
The U.S. has somewhat lagged its peers abroad in looking at climate risk to the financial system, so the Fed’s membership in the NGFS is a sign that U.S. regulators are taking the risks more seriously. If confirmed as President-elect Joe Biden's nominee Treasury secretary, Janet Yellen, a former Fed chair, is expected to focus heavily on the threat about global warming poses to the financial system.
In a September report, the Commodity Futures Trading Commission recommended that U.S. regulators join the NGFS as a means of helping the Fed and other regulatory agencies better understanding the risks climate change pose to banks' balance sheets. That report additionally recommended that U.S. banking regulators design a pilot program to stress test for climate-related risks, an idea that Republican lawmakers and industry groups have pushed back on.
The Network for Greening the Financial System includes 75 central banks across the globe. The Fed’s Board of Governors voted 5-0 to accept membership in the organization.
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