(Bloomberg) -- The Federal Reserve says climate change is a pressing matter, just not for monetary policy.
“Climate change is an important issue but not principally for the Fed,” Chairman Jerome Powell told lawmakers in Washington Wednesday. He said they will “try to learn” from the work its peers are doing globally, but this was largely the responsibility of politicians.
“We’re not going to be the ones to decide society’s response. That is for elected officials, not us,” Powell said at a congressional Joint Economic Committee meeting.
The Fed acknowledges climate change as a potential risk, and considers it from the financial lens, he said, using the example of lenders in regions that are susceptible to severe weather and ensuring they have safeguards in place. The comments come amid a growing consensus that unprecedented efforts are needed to avert a crisis.
Central banks globally have been expanding their roles in the past few years to address the risk posed by a warming climate. That’s led to the creation of the Network for Greening the Financial System, a group of about 50 supervisors and central banks around the world developing and promoting green finance and systems. While the central banks of England, Canada and China are members, the U.S. Federal Reserve is still considering how to participate.
The Bank of England and Governor Mark Carney, whose landmark 2015 speech on climate change was the launchpad for a global central bank movement on the issue, has been vocal about the need for companies to address financial risks.
European Central Bank President Christine Lagarde has flagged openness toward targeting green bonds in the bank’s asset purchase program. In Germany, the Bundesbank led a review on greening the financial markets. And in Sweden this week, the central bank said it’s ditching bonds issued by large polluters.
There’s increased recognition that climate effects are here, and will only worsen as global temperatures warm.
Moody’s Analytics estimates it’ll cost nations $69 trillion by the end of the century, while Oxford Economics says that a 2 degrees Celsius increase in global temperatures will cut growth by as much as 7.5%. Costs typically include the effects of water-level rise in populated areas and migration, changes in food supply, and infrastructure rebuilding.
Individual Fed governors have weighed in.
Federal Reserve Bank of New York Executive Vice President Kevin Stiroh told an audience last week that the U.S. economy has already been hit with half a trillion dollars in losses over the past five years as a result of climate change. San Francisco Fed President Mary Daly and Governor Lael Brainard also have said that central banks can no longer ignore the threat as it will affect prices, productivity, the labor market, and output -- all of which relate to monetary policy.
Powell said Wednesday that he’ll monitor the work of global peers. “We’re going to benefit from the activities of other central banks” on climate issues, he said. “We’ll try to learn.”
To contact the reporter on this story: Katia Dmitrieva in Washington at firstname.lastname@example.org
To contact the editors responsible for this story: Scott Lanman at email@example.com, Sarah McGregor, Robert Jameson
For more articles like this, please visit us at bloomberg.com
©2019 Bloomberg L.P.