Greening the Federal Reserve

The Problem

The climate crisis poses a huge threat to price and financial stability, and therefore to the entire economy. Addressing climate change will require a major shift in how financial resources are allocated. However, Wall Street banks continue to finance fossil fuels to the tune of trillions, driving the climate crisis and exposing the economy to transition and physical risks. 

Transition risks are the risks that arise as a result of changes in policy and business practice as we make the necessary transition away from fossil fuels, in line with a 1.5°C pathway. For instance, government action to transition to a renewable energy economy could mean a decrease in the value of fossil fuel assets — these need to be managed properly to prevent economic disruption. And physical risks are direct risks to societies caused by exacerbated extreme weather and other climate-related events, such as intensified flooding, droughts, and wildfires.

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The role of The Federal Reserve

As the central bank of the US, The Federal Reserve System (Fed) has a critical role to play in ensuring financial stability, and shifting the flow of finance away from fossil fuels and towards a just and sustainable economy. The Fed is a key part of the financial regulatory system in the US. It is responsible for overseeing the nations’ banks, and addressing risks to the financial system overall. The Fed’s main responsibilities are to:

  1. Promote the safety and soundness of individual financial institutions and monitor their impact on the financial system as a whole
  2. Set monetary policy to promote maximum employment and stable prices
  3. Promote financial system stability by monitoring and addressing risk 
  4. Promote consumer protection and community development
  5. And support the payment and settlement system

Climate change threatens the Fed’s ability to successfully carry out any of these responsibilities. 

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Our Demands

Climate change threatens the Fed’s ability to successfully carry out its responsibilities. The Fed has the authority and the necessary tools to address climate risk in the financial system. But so far the Fed isn’t using these tools. That’s why we’re joining other civil society groups in building a dynamic and widespread people-powered movement, campaigning to ensure that the Fed understands the severity of the risk we face from climate change, and then acts accordingly. We are calling on the Fed to: 

  1. Disclose the Fed’s own climate risk, and exclude fossil fuels from its monetary policy operations, such as its asset purchases and the collateral it accepts for loans
  2. Implement higher capital requirements for risky fossil fuel lending and restrictions on banks’ financing fossil fuels
  3. Require banks to outline and enact  science-based plans for how they will reach net zero emissions
  4. Update the Community Reinvestment Act to redirect capital towards climate action and community resilience
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