The Federal Reserve should stick to its current mandate and avoid the 鈥榬egulatory distraction鈥� of tackling climate risk, a senior official at the US central bank said Friday.聽
The Fed has a dual mandate to maximise sustainable employment and ensure stable prices, and is also responsible for regulating banks in the United States.聽
It should ensure that its focus on 鈥榯raditional risks is not lost or diluted,鈥� Fed governor Michelle Bowman told a conference in Texas Friday, according to prepared remarks.
鈥極ne example of a supervisory and regulatory distraction is from the Fed鈥檚 recent focus on climate risk,鈥� she said, referring to a Fed pilot climate analysis of six US banking giants designed to see how resilient they were to climate-related financial risks.
The banks, including Goldman Sachs and Wells Fargo, reported having 鈥榮ignificant鈥� challenges when estimating the financial risks from climate change because of a lack of good data.
Although the 鈥榚xploratory鈥� exercise does not have any real-world regulatory consequences for these banks, it nevertheless marks a rare foray into the topic of climate change for the independent US central bank.
鈥楩irms are already required to manage all material risks, and prioritizing climate risk in this way could lead to the misallocation of risk-management resources,鈥� Bowman said Friday.
