Fed pulls out of global climate change group before Trump inauguration
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The Federal Reserve building in Washington, DC. Photo: Samuel Corum/Bloomberg via Getty Images
The Federal Reserve said on Friday that it will quit a group dedicated to addressing the risk climate change poses to the global financial system.
Why it matters: The Fed's exit from the coalition suggests a huge pivot underway relative to years past. As President-elect Trump readies to take office, it is more obvious than ever that the political winds have shifted.
- Central banks, Wall Street and other corporations once faced backlash for not taking enough climate action.
- The Fed leaving the France-based group — called the Network of Central Banks and Supervisors for Greening the Financial System — follows several large banks pulling out of a UN-backed net zero agreement in recent days.
What they're saying: "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 said in a press release.
- Of the seven governors on the Fed board, two abstained — both of whom were appointed by President Biden: the Fed's top bank cop Michael Barr and economist Adriana Kugler.
- Two other Biden appointees, Lisa Cook and Philip Jefferson, voted in favor of pulling out of the group.
Flashback: The Fed joined the NGFS in 2020, one of the last major global central banks to do so.
- Then, Powell said in a statement the Fed would engage with the group as it develops an "understanding of how best to assess the impact of climate change on the financial system."
At a congressional hearing in 2022, Powell said that direct action on climate change could not come from the Fed — that was up to lawmakers and the private sector.
- "Our role on climate changes is a limited one, but it's an important one. And it is to ensure that the banking institutions that we regulate understand their risks and can manage them," Powell said.
The intrigue: In a sense, the Fed's exit from the group is among the first official actions that back up Powell's recent comments.
- In a notable speech in 2023, Powell said the Fed would not be a "climate change policymaker."
- He warned that the Fed should not cross into issues that weren't directly associated with the mandates assigned by Congress: price stability and full employment.
- Doing so, Powell said, would "undermine the case for our independence."
