Chair Powell States Federal Reserve is Not a "Climate Policymaker"

Today, Chair Powell of the Federal Reserve delivered a speech at the Symposium of Central Bank Independence in Stockholm, Sweden, in which he stated that the Federal Reserve is "not, and will not be, a 'climate policymaker,'" as "it would be inappropriate for [the Federal Reserve] to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals" "without explicit congressional legislation."  In essence, Powell re-affirmed the focus of the Federal Reserve on monetary policy and declined to unilaterally expand its mandate to embrace a regulatory focus on combatting climate change.  He explained that "[i]t is essential that we stick to our statutory goals and authorities, and that we resist the temptation to broaden our scope to address other important social issues of the day." 

That said, Chair Powell did acknowledge a limited role for considerations of climate change with respect to the Federal Reserve's regulatory authority, noting that "the Fed does have narrow, but important, responsibilities regarding climate-related financial risks.  These responsibilities are tightly linked to our responsibilities for bank supervision.  The public reasonably expects supervisors to require that banks understand, and appropriately manage, their material risks, including the financial risks of climate change."  In other words, according to Chair Powell, the Federal Reserve's regulatory responsibilities with respect to climate change are limited to ensuring that banks appropriately account for the material risks of climate change when managing their portfolio. 

This speech is likely to be disappointing, albeit not wholly unexpected, for climate activists.  Many proposals for financial regulations concerning climate change revolve around effectively "de-funding" sectors of the economy (frequently fossil fuels and extractive industries), and Chair Powell has now stated that the Federal Reserve will not be part of any such efforts.  Such a decision is not because Chair Powell discounts the possibility that the Federal Reserve could have an impact, but rather because such regulations are, in his view, beyond the scope of the Federal Reserve's authority, since "[d]ecisions about policies to directly address climate change should be made by the elected branches of government and thus reflect the public's will as expressed through elections."  Notably, this perspective--that robust climate-focused action by financial regulators is ultra vires--is embraced by the Republican SEC Commissioners who have been continuously dissenting from the SEC's recent focus on climate disclosures, and may likely provide further reinforcement for that critique of the Biden Administration's proposed financial regulations concerning climate change.