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climate risk
Educators Call on Fed Chair Powell to Act on Climate Risk
With the planet at a boiling point, the Federal Reserve’s silence indicates that they are willing to leave people behind, as they did when the subprime mortgage crisis took down our economy.
Nov 03, 2023
Last month, Federal Reserve (Fed) Chair Jerome Powell hosted a question and answer 'economic education' town hall with teachers from across the country. As an educator worried about an uncertain future wrought with climate disasters and economic instability, I joined over 120 of my peers and colleagues in writing a letter directly to Chair Powell, asking him to answer our questions on how the Fed plans to protect teachers, our students and the U.S. financial system from the biggest threat facing financial stability and our economy — climate change.
The outcome however was not what we had hoped for. Chair Powell ignored us. Our letter was never acknowledged and our questions were dismissed outright. The whole event was shockingly disconnected from reality and scarcely educational at all.
It is ironic that Chair Powell would host a town hall for teachers but completely ignore questions from educators like myself. But what concerns me the most is that the Fed’s silence indicates that they are willing to leave people behind, as they did when the subprime mortgage crisis took down our economy.
As students and young people rise up across the country demanding an end to fossil fuels, Chair Powell seems to have retreated back into his ivory tower
Left unchecked, mounting climate risks could lead to a financial crisis potentially far more catastrophic than the Great Recession. As the letter detailed, banks' excessive risk taking with the subprime mortgages led to the 2008 crash which deeply damaged teachers' pensions, and resulted in sharp declines in state and local tax revenues that support public schools. The recession left teachers with fewer resources in the classroom, and to date, schools have yet to recoup their financial losses. Now we are at risk of repeating the same cycle. This time the risks stem from climate-driven disasters and banks' financing of fossil fuels that exacerbate these disasters—new research reveals that between 2016 and 2022 U.S. banks gave over half a trillion dollars to some of the dirtiest kinds of 'carbon bomb' projects. It's clear that banks are not taking climate related risks seriously enough.
We have reached a point where we can no longer ignore the grim realities of the fossil-fuelled climate crisis. Teachers are already vulnerable due to the widespread teacher shortages and egregious student to teacher ratios. And now we are confronting the physical and mental harms that climate change wreaks, including damages to schools from climate disasters like flooding, school closures due to excessive heat, climate-induced anxiety, and more. But if that wasn't enough, as the letter to Chair Powell noted, extreme heat also reduces labor productivity, and is forecasted to cost the U.S. economy $500 billion by 2050 — further placing this issue squarely within the Fed's remit given its full employment and price stability mandate.
Teachers should not be left to fend for themselves: the Fed can step up, use its existing authorities and the many tools at its disposal to avert a climate fueled financial crisis. The first and most important step the Fed can take is to mandate that the biggest banks stop financing the climate crisis. That no such policy or regulation has yet been enacted is a glaring dereliction of duty and an issue that hundreds of educators asked Chair Powell to address at the town hall.
The reorientation to clean energy and the many job opportunities it creates for our future workforce is happening, with legislation like the Inflation Reduction Act and a suite of climate policies in California only hastening the transition. What's more, Congress recently introduced the Green New Deal for Public Schools Act, which would invest $1.6 trillion in the U.S. public school system, and is projected to eliminate 78 million metric tons of carbon emissions over ten years. This is a huge step in the right direction for our schools and our students. This news comes as New York University joins several others in acting based on climate research and committing to divest from fossil fuels. The clean energy transition is underway and U.S. banks are falling behind — they hold a whopping one-third of the world’s fossil fuel stranded asset risks — underscoring the urgent need for bold action by the Fed.
As students and young people rise up across the country demanding an end to fossil fuels, Chair Powell seems to have retreated back into his ivory tower, comforted in his short term perspective that he will not in the next three years have to face the most catastrophic impacts of climate change that are yet to come. But the Chair can be sure of the fact that the Fed, under his supervision, has actively contributed to accelerating the climate emergency by failing to regulate banks' financed emissions — inaction in this case is a policy choice, one that supports banks' lending and underwriting for the fossil fuel industry that is on its way out while causing environmental, economic and social damage and instability
It's not too late for the Fed to change course. Chair Powell, it is not too late to answer our question: What are you doing to protect students, teachers and the U.S. financial system from climate-related financial risks?
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Markey, Pressley Lead Call for Fed to Address Climate-Related Financial Risk
"Big banks are financing fossil fuels and fanning the flames of climate chaos," said Sen. Ed Markey.
Sep 18, 2023
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."
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