Experts alarmed as US makes sudden withdrawal from international risk management group: 'Deeply concerning'

The U.S. government made another move to distance itself from global action to combat rising temperatures — this time by pulling out of an international group dedicated to managing financial risks tied to the changing climate. 

What's happening?

The U.S. Treasury Department announced that it is withdrawing from the Network for Greening the Financial System, a global coalition aimed at mobilizing green finance and developing recommendations for pollution-risk management in the financial sector, reported Reuters. 

The decision aligns with President Donald Trump's executive orders regarding environmental agreements and energy policy, which prioritize dirty energy sources, including oil and gas development, over anti-pollution initiatives.

In a statement, the Treasury said NGFS's initiatives were "inconsistent" with the administration's priorities and that its frameworks on monetary policy "go beyond FIO's core duties." The Treasury's departure follows similar exits by the Federal Reserve Board and the Federal Deposit Insurance Corporation, both of which withdrew around the time of Trump's inauguration, according to Banking Dive.

Why is this withdrawal concerning?

The planet's overheating is not just an environmental crisis — it's also an economic one. 

Gradually rising sea levels and extreme weather put trillions of dollars at risk. The NGFS was established in 2017 to help central banks and regulators worldwide develop strategies to integrate risks from the effects of greenhouse gas pollution into financial oversight. The U.S. Treasury's withdrawal weakens international coordination efforts and may hinder progress in addressing related financial instability.

The move is part of a broader rollback of policies designed to reduce pollution. Trump signed multiple executive orders on his first day back in office, including directives to withdraw from the Paris Agreement, declare a national energy emergency, halt wind power development, and make plans to suspend funding from the Inflation Reduction Act and the Bipartisan Infrastructure Law.

Policy experts and advocates have expressed alarm. "It's deeply concerning … [the country] is now retreating from an international body specifically dedicated to addressing climate-related financial risks," Carly Fabian, a senior insurance policy advocate with Public Citizen's Climate Program, told ESG Dive.

While the Republican Party supported the move as compliant with Trump's orders, 18 Democratic members of Congress issued a statement saying, essentially, that even if U.S. leadership disagrees with the action, it's still worth being part of the NGFS. 

"Withdrawing from the NGFS puts our prudential regulators further behind and out of step with actions being taken by our global counterparts," the statement said. "The U.S. must have a seat at the table to influence these international standards and approaches as they are crafted. Addressing all potential threats to safety, soundness, and financial stability, regardless of their source, is central to fulfilling your agency's statutory mandate. You should not deviate from those mandates due to political pressure."

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What's being done about it?

Despite this setback, other U.S. agencies and global partners remain engaged in tackling financial risks related to increasing weather and heat disasters. The Department of Labor is continuing to allow retirement plan managers to consider environmental, social, and governance factors when making investment decisions, Reuters reported, although that may soon change.

Meanwhile, in states like New York, lawmakers have reintroduced two bills that would require corporate pollution disclosure rules similar to those adopted by California in 2023, reported Green Central Banking, signaling continued momentum for state-level pollution transparency efforts.

The NGFS, despite the U.S.'s withdrawal, still remains a key player in global climate finance, with 144 central banks and supervisory authorities from 90 countries, representing 100% of global systemic banks and 80% of internationally active insurance groups. While the U.S. Treasury is stepping back, international momentum for pollution-focused financial oversight remains strong.

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