The Federal Reserve announced on Thursday that six banks would be participating in a pilot program to analyze climate-related financial risks based on “specific portfolios and business strategies,” according to a press release. The focus isn’t on firm-specific issues, but rather on what big banks can learn from taking into account how climate change may impact their business. The six banks involved—Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo—make up some of the largest financial institutions in the country and include banks whose CEOs just last week were answering to the House Financial Services Committee at an annual hearing meant to hold them accountable.
Participating in the Fed program marks a stark change from the more defiant tact the likes of JPMorgan Chase CEO Jamie Dimon and Wells Fargo Charles Scharf took when answering climate-specific questions. Big banking heads seemed unwilling to consider how climate change may be bad for business, and instead made it clear they were unwilling to divest from fossil fuel companies—a GOP-stoked fear that actually hurts their bottom line as well as the planet. More details on the pilot program will be available in the coming weeks, and the program will launch early next year.
Climate groups were encouraged by the news and called the program “a promising first step” by the Fed. “The climate crisis already affects financial institutions and the broader economy, but banks are seriously unprepared to respond and adapt,” Sierra Club Fossil-Free Finance Campaign Representative Adele Shraiman said in a statement. “In fact, big banks still pour billions into fossil fuels, ignoring the serious risks posed by climate change and threatening the savings of everyday Americans in the process. As the country’s most powerful financial regulator, the Federal Reserve is finally sending a strong signal to banks to start taking climate risk seriously and prepare for the clean energy transition.”
Along with 350.org, Women's Earth and Climate Action Network, and Positive Money U.S., the Sierra Club is part of a coalition known as Stop The Money Pipeline, which is dedicated to holding the financial sector accountable for its role in the worsening climate crisis. They’re encouraged by the Fed’s exercise and big banks’ participation but agree that there should be much more action should be taken.
“We need the Fed to move from exploring to acting,” Positive Money U.S. Lead Campaigner Akiksha Chatterji said. “We have enough information about the dangers of climate change to justify regulatory and supervisory action now, such as penalizing banks' excessive and reckless fossil fuel lending. To truly safeguard financial stability, the Fed must further introduce policies that reflect the high risk of fossil fuel investments.”