Dive Brief:
The Federal Reserve Board on Tuesday said it has joined the Network for Greening the Financial System (NGFS), a group of central banks and supervisors committed to managing climate change s financial risks and mobilizing mainstream finance toward a sustainable economy.
The move signals a burgeoning recommitment by the U.S. to the Paris Climate Accord, a requirement of full membership in the NGFS. President Donald Trump announced in 2017 he was withdrawing the country from the Paris agreement. President-elect Joe Biden has said the U.S. will rejoin after he takes office next month.
Fed membership in the NGFS and other international climate-focused organizations was among the 53 actions a Commodity Futures Trading Commission (CFTC) subcommittee suggested in a September report on managing climate-related risk. The Fed wouldn t be the only U.S.-based regulator attached to the NGFS. New York s Department of Financial Services is also among the group s 83 members.
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INANCIAL FIRMS produce very few greenhouse-gas emissions directly, aside from those associated with keeping the lights on and the computers whirring. But the picture changes dramatically when you add “financed emissions”, those associated with a firm’s lending and investing activities. Figures from the few banks and asset managers that disclose them suggest that financed emissions are 100 to 1,000 times bigger than operational ones.
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Financed emissions are now coming under more scrutiny from climate-conscious clients and campaigners, and lenders are hoping to manage the associated reputational and regulatory risks. Green regulation, for instance, could damage the viability of an investment. On November 30th Barclays, a British bank, published plans for its net-zero target. Its goal will be to cut emissions from deals it arranges in the capital markets as well as on its loans.