NEARING THE HORIZON — It was 2015 when Mark Carney, then governor of the Bank of England, famously warned of climate risk in his tragedy-of-the-horizon speech. Six years later, the world’s central banks have yet to take up their formidable regulatory weapons in the fight against climate change, activists say. Now a ranking of the world’s 12 largest central banks has put the granddaddy of them all, the U.S. Federal Reserve, dead last, behind India and China, when it comes to climate action. The Fed failed every metric measured by Oil Change International, a nonprofit advocacy group based in Washington, D.C., earning a grade of “grossly insufficient.” “The Fed has been late to the party,” said David Tong, a global campaign manager for the group. “I’m surprised that the Fed is lagging behind, partly because of the vast scale of oil and gas production in the U.S.” The report adds to a volley of criticism aimed at Fed Chair Jerome Powell, a Republican tapped by then-President Donald Trump to become Fed chief in 2018, as the left mobilizes against his renomination. Among their complaints: Under one pandemic response program, the Fed bought $5.1 billion worth of corporate bonds, about 9 percent of which went to fossil fuel producers and other “dirty” industries. It might not sound like much, but the $470 million the Fed spent buying fossil fuel corporate bonds is disproportionately high compared with the industry's share of overall corporate debt and equity markets. And in the context of economic recovery, the industry accounts for a small portion of U.S. employment, Tong said. It's the only sector where the Fed was overweight on all three metrics. A program for smaller businesses directed nearly 13 percent of loans to fossil fuels and 1 percent to renewable energy companies, Oil Change International said. The Fed’s money, combined with congressional pandemic aid, “triggered a fossil fuel borrowing boom,” the nonprofit wrote. In the six months leading to September 2020, 56 oil and gas companies issued $99.3 billion in debt, the highest level of borrowing in a decade. Let’s be clear — Powell has stepped up. Yes, he’s said that climate change isn’t a “main factor” in Fed policy decisions. But under his watch, the central bank joined the Network for Greening the Financial System, a global coalition of central bankers and regulators focused on mitigating climate risk. Powell has called climate change an emerging risk for banks and established a supervision climate committee. The bank’s stability report mentioned climate for the first time in November. He has told lawmakers that ensuring a “resilient” financial system fits with the Fed’s congressional mandates, and says “there’s a lot to like” about climate stress tests. Powell’s term expires in February. President Joe Biden is expected to make a decision on his renomination this fall. “Civil society will keep the pressure up to have Powell replaced, and if Powell is nominated, civil society will keep the pressure on Powell to act,” Tong said. So which bank is getting it right? None of them. The European Central Bank came closest, but Oil Change assigned all of them a poor rating.
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