NEW REPORT: 5 Steps the Next Federal Reserve Chair Must Take to Address Climate-Related Financial Risk

As President Biden Nears A Final Decision On His Nominee For The Next Fed Chair, Evergreen Outlines Steps Fed Must Take To Mitigate The Risk Of A Climate-Fueled Recession

Today, as the Federal Reserve kicks off its annual Economic Policy Symposium, Evergreen Collaborative released 5 Steps the Next Federal Reserve Chair Must Take to Address Climate-Related Financial Risk, a new policy report that outlines steps that the next Fed Chair must take to address climate-related financial risk and fulfill the Fed’s mandate to protect the American economy. 

In the coming weeks, President Biden will decide whom to nominate as Fed Chair, amid mounting pressure to select a Chair that will take decisive action to protect our economy from a climate-fueled crash. Evergreen’s new report lays out why action by the Fed is essential, and 5 critical steps it must take to protect our financial stability from climate-related risks:

  1. Creating mandatory climate-risk disclosure rules
  2. Conducting regular climate stress tests to build resilience to climate shocks
  3. Setting “capital requirements” to ensure banks internalize some climate-related risks
  4. Limiting investments that are not in line with the Paris agreement
  5. Updating the Community Reinvestment Act regulations to drive equitable green finance

Read the full report here.

“Climate change puts our economy, and the financial security of every American, at risk,” said Evergreen Action Deputy Policy Director Becca Ellison. “It is not a question of if we will pay for the costs of climate change, but when. And the longer we wait to rein in Wall Street’s reckless climate-risky behavior, the greater the economic toll. President Biden must ensure that any candidate nominated for the Fed is committed to fulfilling their mandate by using every tool available to prevent a climate-fueled economic crash.”

As climate-fueled disasters sweep the country, the enormous costs continue to mount—and all too often, they are borne by the low-income communities and communities of color that are already overburdened with systemic inequalities. In 2020, climate disasters cost the United States $95 billion, nearly double the losses of 2019. At 4 degrees of warming, the global economic losses could reach $23 trillion by 2100, several times the cost of the 2008 crash. 

Despite these enormous costs and risks, Wall Street has failed to factor climate risk into their decision making—in fact, in recent years big banks have only increased their exposure to risky fossil fuel assets. The Fed, which is charged with protecting the stability of the financial system against risk, must take action to confront the systemic risk that climate change poses to our financial system. President Biden must ensure the Fed Chair is committed to using the agency’s existing authority to protect the American financial sector from a climate-fueled crash.