Federal Reserve Pulls Back from Climate Risk Group

The U.S. Federal Reserve announced its withdrawal from the Network for Greening the Financial System, a global body aimed at addressing climate risks in finance. This decision aligns with views that climate policy should be set by Congress, not the Fed. Other financial institutions are following suit.

The U.S. Federal Reserve has announced its decision to exit the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), citing a mission that now extends beyond its statutory mandate. This group focuses on addressing climate-related financial risks.

Established in 2017, the NGFS assists central banks and supervisors in incorporating climate risks into monetary policies and financial regulation. The Fed's exit comes just before President-elect Donald Trump, known for his skepticism towards governmental climate initiatives, takes office, prompting broader shifts across financial institutions.

Despite preliminary climate-related work by the Fed, Chair Jerome Powell has reiterated that setting climate policy is Congress's responsibility. This sentiment is shared by Republicans, leading to an industry-wide reassessment of climate risk policies. Following the Fed's announcement, the Bank of Montreal also exited the Net-Zero Banking Alliance.

(With inputs from agencies.)