“Chairman Powell, we implore you to take climate risk seriously”
Climate disasters are increasing in scale and frequency, people are losing homes, and insurers are pulling out of climate-vulnerable areas. Homeowners, businesses, and ultimately, banks are increasingly exposed, which means the risk to the stability of the American financial system is very real and growing.
Meet Akiksha Chatterji, a Climate Finance Campaigner for Positive Money US. She is part of a broad coalition of young activists on a mission to meet U.S. Federal Reserve Chairman Jerome Powell and raise tough but fair questions on the escalating financial risk to the global banking system from climate change.
Earlier this year, Chatterji got wind that Powell would hold a virtual Q&A town hall with teachers on “economic education.” She did some research and “asked folks who might be interested and wanted to help organize teachers and a core group was formed,” she says. Soon, she was connected with a diverse alliance of organizations working on climate-related financial regulation.
She wanted to ask Powell about his laissez-faire views on climate policy and regulation. Earlier this year, he told senior central bankers that the Fed “will not be a “climate policymaker” because that is the responsibility of “the elected branches of government.” His role, he said, was focused only on climate-related financial risk. “It would be inappropriate for us to promote a greener economy or to achieve other climate-based goals,” he told the bankers. This reticence also reflects the intense pressure he is getting from conservative lawmakers demanding no engagement at all in climate change-related issues.
But Chatterji says Powell is failing even in his narrow risk mandate. The Fed, she says, has “comprehensive insight into the nation’s largest and riskiest banks and their operations, and is perhaps the most important banking regulator when it comes to preventing another financial crisis driven by climate change.”
“It’s kind of shocking how this institution can make decisions that impact our lives, but we have almost no channels to ensure our voices are being heard and represented at the Fed.”
They also are challenging the Fed’s legendary opaque approach to policy and public engagement. But to no one’s surprise, Chatterji’s efforts to get Powell to answer a question at the town hall got nowhere despite going through a formal communications process of supplying questions and submitting a letter from more than 120 teachers sent prior to the town hall.
“You know,” she says, “It’s kind of shocking how this institution can make decisions that impact our lives, but we have almost no channels to ensure our voices are being heard and represented at the Fed.”
Since Chairman Powell and his communications minions ignored her and the hundreds of teachers who wanted climate answers, we decided to publish an open letter to Chairman Powell from Chatterji, hoping he would read it and respond.
Dear Chairman Powell,
Almost a year ago, I and many of America’s teachers were so excited to hear that the Federal Reserve was to host an “economic education” town hall with educators from across the country. What an opportunity. Thank you!
As you know, Chairman Powell, we are increasingly concerned about climate-related financial risks that threaten teacher retirement savings and pensions, schools, homes, and the students they teach. Many educators also have long memories of how the Great Financial Crisis of 2008–2009 affected their pensions. So we were eager to ask you questions about the increasing risk of climate change on our financial system and what you are doing to guard against these risks.
Educators’ climate risk concerns go unanswered by Chair Powell
What we did not expect is that you would ignore every single one of our questions! You can imagine how disappointed we were when you answered almost everything else, even what you do in your spare time. How is it possible to talk about “economic education” and not even mention the enormous risk climate change poses to our economy?
The Fed is failing to lead on climate change
We also submitted a letter signed by over 120 teachers who want to know why the Fed isn’t using its current authorities to take action to rein in U.S. banks’ continued financing of fossil fuel expansion before another economic crisis unfolds.
Our letter wasn’t that much different from the one Senator Ed Markey and Representative Ayanna Pressley sent you.
Unfortunately, you did not respond to that either.
We are increasingly concerned about climate-related financial risks that threaten teacher retirement savings and pensions, schools, homes, and the students they teach.
But, Chairman Powell, I have to be honest: We were not surprised at your silence. As the climate crisis escalates, we are increasingly concerned that you are not taking these risks seriously.
Although you have acknowledged the risk, you and your team have failed to act at the scale or pace necessary to effectively mitigate climate financial risks. There is a growing recognition among teachers, students, and, frankly, among people across the U.S. that you need to do more to address these issues. Some even question whether you are fulfilling your responsibilities as the world’s most influential central banker.
We wonder why you are so reticent. It is now well established and agreed upon — including by the U.S. Treasury, the Financial Stability Oversight Council (FSOC), the Bank of England, and the European Central Bank — that climate change poses a serious and growing threat to our entire financial system and with it, our entire economy.
Yet, far from being a global standard setter on climate-related central bank policy, as you should be, the Fed is lagging behind its international counterparts under your watch. The European Central Bank (ECB), for example, is set to institute new climate transition plan reviews that allow the central bank to increase capital requirements for banks that are poorly prepared or at high risk. We are seeing nothing like this from you. Yes, we have read your recent climate risk guidance. But it’s a tiny first step and falls short of addressing banks’ destructive lending habits and many other climate-related financial risks.
Chairman Powell, why are you ignoring one of the biggest threats facing the U.S. financial system and the broader economy?
Do you listen to your ECB colleague, Frank Elderson? Recently, he said that “central banks now know that climate-related risks translate into financial risk.”
Listen to what he says: “We have to go faster. We have to do more. We have to pull out all the stops. Those who make the rules and those who follow them. Those that pollute, and those that finance those that pollute. And those that supervise those that finance those that pollute. All of us.”
You can’t continue to ignore us
While you ignored us in September, you cannot keep ignoring our efforts to make our voices heard — after all, aren’t you supposed to work in our interest?
In August, activists protested at the annual Jackson Hole Economic Policy Symposium, calling for central banks to step up and play their part in ending the financing of fossil fuels. Again, how is it possible that the Federal Reserve hosted a symposium on “Structural Shifts in the Global Economy,” and you made no mention of climate-related financial risk?
Between 2016 and 2022, U.S. banks alone gave over half a trillion dollars to “carbon bomb” projects.
And in September, activists shut down the New York Federal Reserve branch, one of several protests calling for an end to fossil fuels in the week leading up to the U.N.’s Climate Ambition Summit. You may have also seen a picture on the front page of The New York Times of tens of thousands of Climate Week marchers demanding an end to fossil fuel funding,
Growing climate risk
Nor can you ignore the roots of our concerns. These actions and letters targeting the Fed come as the U.S. sets a new record for billion-dollar climate disasters in a year, having experienced 24 extreme weather events already. Severe weather has cost the U.S. economy more than $617 billion between 2018–22 and $177 billion last year alone. But you know this, right?
Teachers are also concerned about the impact of climate change on the insurance they pay to protect their homes and the schools they teach in. Increasingly, insurers are raising premiums, pulling back on coverage, or fleeing from climate-vulnerable areas like Florida.
The Fed and fossil fuel lending
Chairman Powell, can we also talk about bank lending to fossil fuel companies? We know it is a sensitive subject. But there is now international scientific consensus that such extreme weather would not have happened without the fossil-fuel-driven climate emergency. Despite this, U.S. banks remain the largest funders of fossil fuels globally. Between 2016 and 2022, U.S. banks alone gave over half a trillion dollars to “carbon bomb” projects. That is a shocking figure.
In Fed-speak, clearly, both transition and physical risks to our economy are growing rapidly and they’ll only get worse. We can’t afford to stall action any longer. You must take the Fed’s mandate seriously and use all of the tools at your disposal to rein in climate risks.
Nice guys engage on climate
Here is the message we want you to hear: You are among the most influential financial regulators. Given the urgency of this moment, you must use your authority and that of the U.S. Fed to prevent a financial crisis driven by unchecked climate risks and help accelerate the transition to a clean energy economy because there is no greater threat to financial stability than climate change.
Chairman Powell, you are probably a nice guy. But you must admit: For an institution that is supposed to serve the public, there is very little democratic accountability at your shop. And by ignoring us, it feels like you’re actively trying to avoid accountability.
Get on the right side of history
Chairman Powell, we implore you to get on the right side of history. We are the generation that faces mass extinction due to the actions your generation has taken and failed to take. We are the ones who have to face the realities of lost lives and livelihoods fueled by climate change. You have the power and the authority under the Fed’s current mandate to shift financing from fossil fuels. We simply ask that you use that power.
Featured photo: Powell watches climate protesters. Source: Fox