"Big banks are financing fossil fuels and fanning the flames of climate chaos," said Sen. Ed Markey.
Led by U.S. Sen. Ed Markey and Rep. Ayanna Pressley, lawmakers on Monday warned that the U.S. government ignores climate-related financial risks at its own peril—imploring Federal Reserve Chair Jerome Powell to take the climate into account when overseeing financial institutions.
The two Massachusetts Democrats led colleagues including Sen. Bernie Sanders (I-Vt.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.) in writing to Powell to say the Federal Reserve can and must help "protect the stability of the financial system" by requiring financial firms to end their funding of fossil fuel projects.
With international scientists agreeing that extreme climate events this summer such as prolonged heatwaves in the U.S. and Europe and wildfires in Canada would not have happened without the fossil fuel-driven climate emergency, the lawmakers urged Powell to consider the financial damages of such disasters, which they said cost the U.S. economy more than $617 billion between 2018-22 and $177 billion last year alone.
Record flooding in the Northeast in July is projected to cost up to $5 billion in damages, and heatwaves like those that gripped large portions of the U.S. for weeks on end are projected to continue in the coming years, affecting an untold number of businesses. Wildfire smoke pollution like that which drifted south from Canada this summer also costs workers $125 billion in lost wages annually.
"The Federal Reserve has acknowledged that climate change poses an emerging risk to the safety and soundness of financial institutions and the financial stability of the United States," said the lawmakers. "That is why we urge the Federal Reserve to use its existing authority to oversee bank safety and mitigate risks to financial stability, and require financial institutions to submit and execute plans to align their activities with science-based climate targets, including reducing finance emissions."
Climate risk proposals put out by the Federal Reserve "fall short," the letter reads, with nonprofit research group Positive Money ranking the Federal Reserve "near the bottom of its 'Green Central Banking Scorecard.'"
For example, the scorecard points out that the central bank of the U.S. launched an "unlimited Quantitative Easing program, as well as a range of new facilities aimed at purchasing commercial paper, municipal debt, and bond ETFs" at the beginning of the coronavirus pandemic, warning that "schemes that involve the purchase of corporate assets are often highly carbon-intensive."
Such proposals place the Federal Reserve "well behind its peers in responding to climate change," wrote the lawmakers on Monday.
The letter was sent as climate advocates shut down the entrances of the Federal Reserve Bank of New York, warning that the U.S. is contributing to "millions" of future deaths from "catastrophic climate disasters" and demanding strict regulation of energy financing.
"Big banks are financing fossil fuels and fanning the flames of climate chaos," said Markey on social media. "Climate risk is financial risk."