The Federal Reserve Withdraws from an International Climate Change Initiative

The U.S. Federal Reserve announced on Friday its withdrawal from an international initiative on climate change, just days before the inauguration of Republican President-elect Donald Trump.

The Federal Reserve joined the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) in December 2020, praising it at the time as a platform for exchanging ideas on developing financial policies to manage environmental and climate risks, according to AFP.

This network currently includes more than 100 major central banks and regulatory authorities from over 90 countries, including the People’s Bank of China and the European Central Bank.

In a statement, the Federal Reserve explained its withdrawal, citing that the network “has increasingly expanded its scope to cover a broader range of issues that fall outside the legal mandate of the Board.”

The Federal Reserve operates under a dual mandate from Congress to independently address inflation and employment, while also bearing responsibilities for regulating and supervising banks in the United States.

Unlike other central banks, Federal Reserve officials have expressed discomfort with demands from lawmakers and activists to take on a greater role in addressing climate change, a politically charged issue in the United States.

At a conference held in California in early 2024, Federal Reserve Chair Jerome Powell stated: “Federal Reserve policymakers are often pressed to take a position on issues related to the economy but that fall outside our mandate.”
He emphasized: “Policies aimed at addressing climate change are the responsibility of elected officials and the agencies entrusted with that responsibility. The Federal Reserve has not been assigned any such mandate.”