The Federal Reserve has decided to leave the Network of Central Banks and Supervisors for Greening the Financial System, citing an expansion of the network's scope beyond the Fed's statutory mandate. This decision comes just days before President-elect Donald Trump assumes office, reflecting shifting priorities in U.S. financial governance.
Federal Reserve Exits Climate Change Network as Trump Prepares for Presidency
Federal Reserve Exits Climate Change Network as Trump Prepares for Presidency
Amid an anticipated return of Donald Trump to the presidency, the Federal Reserve has announced its withdrawal from a global climate risk network, raising questions about future U.S. financial regulations.
The Federal Reserve officially announced on Friday its departure from an international initiative aimed at addressing climate change risk within the financial sector just days prior to President-elect Donald J. Trump’s return to power. The Fed had joined the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) in December 2020, amid the Biden administration, receiving praise from Democrats while facing skepticism from Republicans concerned about potential impacts on banking practices.
The NGFS serves as a platform for central banks and regulators to collaborate on enhancing the resilience of the financial system against climate-related threats. However, in its withdrawal announcement, the Fed clarified that the network's evolving focus had strayed beyond its legislative mandate. “While the Board has appreciated the engagement with the NGFS and its members, the work of the NGFS has increasingly broadened in scope, covering a wider range of issues that are outside of the Board's statutory mandate,” the Fed stated.
The decision to exit was backed by five members of the Fed’s Board of Governors, including Chair Jerome H. Powell, while two members abstained from the vote. The communication comes shortly after the Fed’s previous commitment to acknowledging climate impacts, given heightened concerns over extreme weather events affecting financial stability.
In the lead-up to the Fed’s formal membership, Republican lawmakers raised alarms that the recommendations from the NGFS might hinder access to capital for critical sectors of the economy. The shift away from this climate network signals a notable change in the approach of the Federal Reserve as it prepares to align with the incoming administration’s contrasting perspectives on financial regulation and climate initiatives.
