U.S. officials have withdrawn critical climate-based guidelines for banks and other large financial institutions. 

What's happening?

As reported by ESG News, the U.S. Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency have officially rescinded the Principles for Climate-Related Financial Risk Management for large financial institutions. 

First issued in late 2023, the principles were a set of guidelines for financial institutions with over $100 billion in total consolidated assets to manage climate-related financial concerns, including physical and transition risks. These principles detailed expectations for areas such as governance, strategic planning, and risk management. 

In a joint press release announcing the decision, the federal agencies noted that they "do not believe principles for managing climate-related financial risk are necessary because the agencies' existing safety and soundness standards require all supervised institutions to have effective risk management commensurate with their size, complexity, and activities."  

Why is the withdrawal of climate-related principles important?

While the agencies believe that rules previously put in place are sufficient to cover any climate-related policies, critics argue that the move ignores the growing financial risks posed by rapidly shifting climate conditions. The decision also reverses previous efforts to promote effective, eco-friendly practices from financial institutions. 

Michael S. Barr, a member of the Board of Governors of the Federal Reserve, was just one of two governors who voted against the withdrawal. 

"Revoking the principles as climate-related financial risks increase defies logic and sound risk management practices," Barr said in a statement.

According to Barr, the agencies offered "literally no evidence to support taking this step only two years after putting the principles into effect." He continued by noting that financial regulators "owe the public a rational, evidence-based explanation for our actions."

What are large financial institutions doing about rising global temperatures?

The burning of dirty fuels releases harmful carbon pollution, which traps heat and causes the temperature to rise across the globe. This increase in temperatures has led to more extreme weather patterns, such as intense storms, droughts, and heatwaves. 

Over the years, numerous major financial institutions have provided funding to the dirty fuel industry, investing in projects that continue to produce carbon pollution. This includes JPMorgan Chase, which has invested hundreds of billions of dollars in the dirty fuel industry since the adoption of the Paris Agreement in 2015.  

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JPMorgan Chase's massive investment in the dirty fuel industry comes as the company continues its pledge to "finance and/or facilitate $1 trillion" to help advance climate initiatives through the end of 2030. 

"We seek to support a low-carbon future while also maintaining energy affordability, security, and reliability," noted JPMorgan Chase. 

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