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WASHINGTON, D.C. — On Thursday, October 16, the Federal Reserve, Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC) announced the withdrawal of the interagency Principles for Climate-Related Financial Risk Management for Large Financial Institutions.

The principles, finalized in October 2023, provided guidance for how large banks should manage the climate-related risks in order to protect the stability of the broader financial system. The principles include crucial guidance on net-zero commitments and climate scenario analysis, two critical components for the effective management of physical and transition risks posed by climate change.

In response to the news, Jessye Waxman, Campaign Advisor with the Sierra Club’s Sustainable Finance campaign, issued the following statement:

“Federal regulators in the U.S. and globally recognize that climate change poses a destabilizing, systemic threat to the financial system. From stranded assets and market shocks to supply chain disruptions, political instability, and ‘climateflation,’ the repercussions are expected to be unprecedented. Economists liken the impacts to those of the Great Depression, but permanent.

Federal Reserve chair Jerome Powell oversaw the passage, and now the removal, of this guidance. So what’s changed? The science remains clear, the risks have grown, and financial best practices have become more sophisticated. The only change is political leadership, making this reversal a purely political move. These principles were designed to promote best practices to help avoid another financial crisis like 2008. Abandoning sound oversight to align with climate denialists is alarming, and should concern anyone who doesn’t want to face another Great Recession — or worse.”

BACKGROUND

In October 203, the Sierra Club applauded the publication of the final principles for finally recognizing that climate change poses a threat to financial stability and for acknowledging the risk of greenwashing by financial institutions.

The principles were crafted based on significant feedback during various interagency comment periods held from 2022 to 2023. The Sierra Club signed onto a coalition comment letter led by Public Citizen and signed by 68 organizations submitted to the Federal Reserve, and a comment letter led by Public Citizen submitted to the OCC. Sierra Club supporters also submitted comments to the Federal Reserve.