The Federal Reserve, the central banking system of the United States, has refused to agree to a plan requiring lenders to disclose their climate risks.
The U.S. position in its approach to changing global temperatures is in "stark contrast" to how other regulators are handling our planet's warming climate, according to Bloomberg.
What's happening?
As Bloomberg reported, U.S. regulators have stunted the progress of the Basel Committee on Banking Supervision's climate plan.
The plan proposed holding loan companies accountable for handling climate risks and imposing fines for noncompliance. It aimed to create a climate disclosure framework for banks and work toward positive climate-planning goals.
As the global standard-setter for bank regulation, the Basel Committee provides a baseline for international rules that regulatory organizations can enforce. Its Task Force on Climate-Related Financial Risks recommended that banks' climate disclosures be mandatory.
The U.S. Federal Reserve opposed the proposal despite approximately 30 other countries being ready to sign off on it.
The European Central Bank already assesses banks' compliance with climate-related disclosures and publishes information about risk metrics. However, the U.S. regulators insisted that climate disclosures should not be enforced.
Why are climate rules for banks important?
Climate shifts and the subsequent extreme weather events are global issues that require the cooperation and participation of all nations, especially the ones that use the most energy and create the most pollution (the U.S. is among the top three polluters, per Climate Trade).
Climate risk disclosures are important because they show how a bank's decisions contribute to and affect our changing climate. These disclosures may include a bank's strategies to mitigate climate risks, the sustainability of a bank's investments, and how extreme weather events impact a bank's business.
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This step backward on behalf of the U.S. halted progress in enforcing stricter future banking rules regarding climate.
What's being done about banking regulations and climate?
Basel Committee chair Erik Thedéen said that "it would be better to strike a compromise than to end with no agreement at all," as Bloomberg wrote. A compromise may still be possible if the Basel Committee can incorporate changes to its plan to appease U.S. regulators.
However, more efforts are needed to promote responsible banking and encourage banks to commit to positive climate actions. Banks can operate sustainably by refusing to fund dirty energy projects and instead putting their money to work for clean energy initiatives.
You can learn about banks' impacts on the environment in reports like the Banking on Climate Chaos, which highlight institutions' greenwashing campaigns and promote transparency in the banking industry.
Some of the world's biggest banks fund actions that harm our planet and worsen rising global temperatures. Fortunately, there are climate-positive banks you can choose to work with, which reportedly invest 100% of your money in clean energy and other climate solutions.
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