Lawmakers: “Recent bank failures reveal the consequences of downplaying or slow-walking management of known but unpriced risks […] it is imperative that the Federal Reserve not repeat the same mistakes with climate”
Washington (September 18, 2023) – Senator Edward J. Markey (D-Mass.) and Representative Ayanna Pressley (MA-07) today led nine of their colleagues in writing to Federal Reserve Chair Jerome Powell urging him to consider climate-related financial risks and ensure the financial institutions they oversee do the same. In their letter, the lawmakers highlighted that climate-related weather disasters cost the U.S. economy tens of billions of dollars each year, a figure that will only continue to grow, and that to protect the stability of the U.S. financial system, the Federal Reserve must take action to reduce climate risk.
“The Federal Reserve has acknowledged that climate change poses an emerging risk to the safety and soundness of financial institutions and the financial stability of the United States,” the lawmakers wrote in their letter. “That is why we urge the Federal Reserve to use its existing authority to oversee bank safety and mitigate risks to financial stability, and require financial institutions to submit and execute plans to align their activities with science-based climate targets, including reducing financed emissions.”
“The 2023 banking crisis further underscores the need for action to adequately manage risk,” the letter continued. “Recent bank failures reveal the consequences of downplaying or slow-walking management of known but unpriced risks—and allowing banks that need strong supervision and regulation to go without it. It is imperative that the Federal Reserve not repeat the same mistakes with climate-related financial risks and instead take decisive action to mitigate them. Although banks are already claiming to support reducing financed emissions, even achieving net-zero emissions by 2050, they continue to finance the fossil fuel industry to the tune of hundreds of billions of dollars annually.”
Senator Martin Heinrich (D-N.M.), Bernie Sanders (I-Vt.), Jeff Merkley (D-Ore.), Brian Schatz (D-Hawai‘i), and Elizabeth Warren (D-Mass.) and Representatives Rashida Tlaib (MI-12), Alexandria Ocasio-Cortez (NY-14), Barbara Lee (CA-12), and André Carson (IN-07) also joined the letter.
In March 2023, Senator Markey and Representatives Pressley and Tlaib reintroduced the Fossil Free Finance Act, which would direct the Federal Reserve to mandate banks and other Systemically Important Financial Institutions to stop financing projects that increased greenhouse gas emissions and to submit a plan on how they will meet these requirements. The legislation would require financial institutions to submit and implement a plan to reduce financed emissions by 50 percent by 2030 and 100 percent by 2050.
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