US regulators are pushing for changes to a key project aimed at addressing climate change risks in the financial system, signaling a shift in America’s approach to environmental issues under President Donald Trump’s administration.
Officials at top US financial watchdogs are advocating for a reduction in the authority of a task force established by the Basel Committee on Banking Supervision to assess climate change risks. This proposal is set to be discussed at a meeting of central bank governors and financial supervisors from around the world.
The move comes amidst the Trump administration’s efforts to divert attention away from climate-related issues within the US government and international organizations like the World Bank and IMF.
The four US regulators on the Basel committee are proposing to downgrade the task force to a working group, a move that may face opposition from some central bankers at the upcoming meeting. European regulators, including the European Central Bank and the Bank of England, have recently urged banks to enhance their efforts in addressing climate risks.
The task force, led by Kevin Stiroh from the New York Fed and Frank Elderson from the European Central Bank, has been instrumental in developing frameworks for banks to disclose climate risks and guiding banks and supervisors on managing threats from climate change.
Critics argue that weakening the Basel committee’s climate project would send a negative message about the importance of climate risks to financial stability. Environmental groups have expressed concern over the potential downgrade of the task force.
In January, the Fed withdrew from the Network for Greening the Financial System, a group focused on researching climate risks. Fed Chair Jay Powell emphasized that the decision was not politically motivated, despite criticisms from those like Kevin Warsh, a potential successor to Powell, who have questioned the central bank’s involvement in climate and social issues.
As discussions continue on the future of the Basel committee’s climate project, it remains to be seen how regulators will balance the need to address climate risks with other financial stability concerns. The outcome of the meeting could have significant implications for global financial regulation and the role of central banks in addressing environmental challenges.
It is essential for financial institutions to stay informed and prepared for potential changes in regulatory frameworks related to climate risks in the financial sector. Stay tuned for updates on this evolving issue.
