In his first public address as Vice Chairman for Oversight of the Federal Reserve Board of Governors, Michael Barr today announced that the Federal Reserve will take its first steps to require financial institutions to assess how their financial condition is doing. term could be affected by the physical damage of climate change and the economic transformation induced by the zero-emission energy transition.

Additionally, Barr confirmed that the Federal Reserve would join the Climate Risk Management Principles for Large Banks, published in draft form by the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency.

In response to today’s announcement, David Arkush, Managing Director of Public Citizen’s Climate Program, issued the following statement:

“Barr’s remarks are welcome and the actions he describes are long overdue. Climate impacts are already affecting the economy, financial institutions and the financial system, and we know they will worsen rapidly. Big banks need to explain how they are preparing.

“Financial institutions must show that they are planning for and participating in the clean energy transition at a pace that matches the science-based goals, which U.S. and foreign governments are increasingly pursuing. Most major US banks say they are committed to reaching “net zero by 2050,” but they continue to lead the world in financing a fossil fuel-based system.

“Recently enacted policies like those in the Inflation Reduction Act and the State of California will propel the transition to clean energy faster than predicted just months ago. This means that the big banks that still finance fossil fuels are at an even greater risk that these assets will be blocked and their loans not repaid. The Fed must curb its recklessness.

For more information: read Looking Over the Horizon: The Case for Prioritizing Climate-Related Risk Supervision of Banks

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