Here’s a stark reality: In 2020, climate disasters cost the United States $95 billion, nearly double the losses of 2019. At 4 degrees of warming, the global economic losses could reach $23 trillion by 2100, several times the cost of the 2008 crash. The climate crisis is here, and it is threatening our lives and our economy.
And yet, Wall Street has failed to take the steps needed to protect our financial system, and to stop fueling the risks of the climate crisis. In fact, big banks have only increased their investments in the fossil fuels that are driving climate risk. Unless the government takes action to rein in the financial sector’s foolhardy behavior, the American people could once again be left to foot the bill for Wall Street’s recklessness.
This memo lays out why action by the Fed is essential, and 5 critical steps the next Fed Chair must take to protect our financial stability and confront Wall Street’s climate-risky behavior.
The government can help. In particular, the Federal Reserve (also known as “the Fed”) oversees banks across the country, and has a mandate to address risks to individual institutions and the financial system overall. As a crucial part of our country’s bank-regulatory system, the Fed supervises and regulates the largest banks and their subsidiaries, giving it comprehensive insight into the happenings of the nation’s biggest, and riskiest, financial actors.
In the coming months, President Biden must decide who he wants to nominate as Chair of the Fed, as the term of the current Chair, Jerome Powell, ends in February 2022. The president will also be making decisions about nominees needed to fill several additional vacancies on the Board, including a key Vice Chair position. Together, these nominations have the potential to reshape the Fed in a major way.
President Biden must ensure that any candidate nominated for the Fed is committed to using every tool that the Fed has available to prevent a climate-fueled economic crash. This memo lays out 5 key steps.