Progressives push Fed to drive funding away from fossil fuel companies

Progressives push Fed to drive funding away from fossil fuel companies
© Greg Nash

More than two dozen House Democrats asked the Federal Reserve on Thursday to use its full arsenal of policy tools to direct funding away from the fossil fuel industry and toward communities harmed by climate change and pollution.

In a Thursday letter to Fed Chairman Jerome Powell, 25 Democratic lawmakers asked the central bank to take more aggressive steps to fight climate change, including several actions the Fed has explicitly refused to take.

“Without concrete objectives and measurable changes to the supervisory framework and monetary policy activities carried out by the Fed, we worry progress will be both too slow and insufficient in scale to adequately address the reality of the crisis our economy and our planet face,” wrote the Democrats, led by Reps. Mondaire JonesMondaire JonesMcCarthy delays swift passage of spending plan with record-breaking floor speech House Democrats brush off Manchin Buffalo race becomes early test for a divided Democratic Party MORE (N.Y.) and Rashida TlaibRashida Harbi TlaibRestless progressives eye 2024 GOP eyes booting Democrats from seats if House flips Tlaib 'fearful' as social spending plan heads to Senate MORE (Mich.).

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The Fed has drawn political fire from Republicans for its early steps toward considering the risks climate change poses to financial stability and the economy. The bank has established two panels to research and identify those dangers, and is considering ways to incorporate climate risks into its supervision of U.S. banks.

Republicans have warned the Fed against steering banks and lenders away from fossil fuel production and toward green energy. But Powell and other Fed officials have unequivocally ruled this direction out. 

“We are not climate policymakers here who can decide the way climate change will be addressed by the United States. We’re a regulatory agency that regulates a part of the economy,” Powell told a House panel in February.

Some progressive Democrats, however, are pushing the Fed to do exactly what Republicans have pressured the bank to avoid.

“Given the Fed’s financial stability objectives and supervisory role over these institutions, we believe there is a clear need and ability for the Fed to incentivize and enforce a reduction in fossil fuel financing,” the House Democrats wrote.

The lawmakers asked Powell to “explore all possible authorities it can use” to “encourage and support bank investment aimed at limiting global temperature rise ... with a particular emphasis on lending to low-income communities and communities of color” hit the hardest by pollution and climate change.

The Democrats also asked the Fed to incorporate climate risks into its bank stress-testing regime — another step the Fed has all but ruled out for now — and gear future emergency lending facilities toward fighting climate change and away from supporting fossil fuel companies.

“We echo the calls made by climate activists and concerned citizens for further action to protect our financial system, our economy, and our planet from the devastating impacts of climate change," they wrote.