Powell defends Fed’s increasing focus on climate change threats

‘Our job is to make sure that financial institutions, banks, particularly the largest ones, understand and are able to manage the significant risks that they take,’ US Fed Chair Jerome Powell said in an interview with the Economic Club of Washington, DC.

Federal Reserve Chair Jerome Powell on Wednesday defended the Fed’s increasing scrutiny of the threat that climate change could pose to the health of the United States’ banks, after some Republican members of Congress had complained that by doing so the Fed was overstepping its mandate. Over the past year, the Fed has taken steps to incorporate the risks from climate change into its oversight of the US financial system. A key part of the Fed’s mandate, in addition to setting short-term interest rates to either stimulate or slow the economy, is regulating banks to guard against excessive risk-taking. Last year, the central bank joined an international organisation of central banks and regulators to coordinate on managing the risks that climate change poses to the financial industry. In a report last year on financial stability, the Fed for the first time cited such risks and established an internal climate committee.