U.S. Federal Reserve leaves climate risk-focused Central Bank Coalition

illuminem summarizes for you the essential news of the day. Read the full piece on ESG Today or enjoy below:

🗞️ Driving the news: The U.S. Federal Reserve has withdrawn from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), a coalition focused on climate and green finance issues
• The decision comes ahead of Donald Trump's presidential inauguration and amid growing Republican skepticism toward climate-focused coalitions
• The Fed cited the NGFS's broadened focus as being outside its statutory mandate

🔭 The context: The NGFS was founded in 2017 to help financial systems manage climate and nature-related risks and mobilize green investments
• The Fed joined in late 2020 under Jerome Powell, using NGFS scenarios for its first climate scenario analysis in 2023 for the largest U.S. banks
• Powell has consistently emphasized that the Fed’s role in addressing climate risks must remain within its mandate

🌍 Why it matters for the planet: The Fed’s exit signals a shift in the U.S. central bank’s approach to global climate finance collaboration
• This decision could weaken international cooperation on climate-related financial risks and diminish efforts to align financial systems with sustainability goals

⏭️ What's next: The move raises questions about the future role of U.S. institutions in global climate initiatives and could influence other central banks’ engagement in such coalitions
• The Fed is likely to continue analyzing climate risks but with reduced reliance on NGFS frameworks

💬 One quote: “The work of the NGFS has increasingly broadened in scope, covering a wider range of issues that are outside of the Board’s statutory mandate.” – U.S. Federal Reserve statement

📈 One stat: The Fed used NGFS climate scenarios in its first climate risk analysis for the six largest U.S. banks in 2023

Click for more news covering the latest on sustainable finance