WASHINGTON — House Republicans critiqued the Federal Reserve's climate scenario analysis, as well as other efforts by Biden administration regulators aimed at helping banks and their clients understand climate risk.
At the same time, other House Republican-led efforts targeted banks themselves, in some large banks' capacity as asset managers, and how they make ESG investing decisions. Both moves are part of a
At a hearing with witnesses that included senior staff from the Fed, Federal Deposit Insurance Corp and the Office of the Comptroller of the Currency, Republicans floated three bills that would require banking agencies to report various policymaking activities to Congress, and
"Following the administration's posture on climate-related financial risk, regulators have begun inserting climate policies into bank regulation and supervision," said Rep. Andy Barr, R-Ky., chairman of the Subcommittee on Financial Institutions and Monetary Policy. "There is little transparency about regulators' climate efforts and what occurs in administration-led climate working groups or international global governance organizations."
Those bills stand little hope of making it to President Joe Biden's desk, but are important messaging tools ahead of the 2024 presidential election, and could be a signal of what the party would hope to accomplish depending on the results of that election, and the rhetoric could inform policy on the state and local levels.
In the hearing, Republicans sought to distinguish between the decisions of private banks and the actions of regulators, although Democrats criticized the hearing and the House's backlash against ESG as politicizing efforts by banks and regulators to manage climate risk.
"There is nothing wrong with regulators wanting to learn more about data, methods and analysis or to ask questions of banks about what they are doing," Rep. Barr said. "No one believes that financial institutions should ignore not fully understood risks. But we and the regulators know that institutions are already analyzing climate-related financial risks, and many large institutions have public-facing information available describing how they are monitoring and managing this risk."
Michael Gibson, the Fed's director of supervision and regulation, defended the Fed's decision to collect data from the largest financial institutions about their climate exposure.
"While there is considerable uncertainty about the timing and magnitude of the impact of climate change across different institutions with different risk profiles, it is prudent to build capacity to better understand the range of risks," Gibson said. "Large banks, for example, are increasingly focused on the risks and opportunities that climate change brings, and supervisors need to understand this."
At the same time, Chairman of the House Financial Services Oversight and Investigations Subcommittee Rep. Bill Huizenga, R-Mich., pressed some banks directly on ESG issues. While banking writ large hasn't been the focus on Republicans' backlash against ESG, some institutions have found themselves on the questioning end of lawmakers based on their asset management activity.
Huizenga's letters went out to BlackRock, Vanguard, State Street, J.P. Morgan Chase, T. Rowe Price, Prudential, Goldman Sachs, Fidelity, Capital Group Companies and the Bank of New York Mellon.
"The lack of transparency surrounding the decisions asset managers make on behalf of millions of retail investors is concerning," he said. "Companies who leverage their voting power to strategically vote on shareholder proposals with the intention of driving social and environmental policy change deviates from the primary focus of maximizing investor returns. Congress must understand how asset managers fulfill their fiduciary responsibilities to prioritize financial returns and act in the shareholder's best interest."
